Colombia: Sustaining Reforms Over Time
Colombia: Sustaining Reforms Over Time
Colombia: Sustaining Reforms Over Time
Colombia: sustaining
reforms over time
Colombia’s experience shows the Over the past several decades Colombia in August 2010, the new government,
importance of sustaining reform has pursued a broad range of structural led by President Juan Manuel Santos,
efforts over time and adjusting and institutional reforms. The emphasis has been pushing forward an economic
them to the changing needs of the has shifted over the years, reflecting the reform agenda through the “Prosperity
economy, whether at the national priorities of different administrations and for All” national development plan for
or local level. the perceived needs of the economy. In 2010–14. The plan’s overall goals are
the 1980s and early 1990s much of the to reduce poverty, increase income,
Colombia is a regional leader in
focus was on macroeconomic manage- generate employment, improve security,
narrowing the gap with the world’s
ment.1 As progress was made in laying ensure the sustainable use of natural re-
most efficient regulatory practice.
a firm foundation of macroeconomic sources and improve the quality of the
Over time, the focus of Colombia’s stability, the focus shifted to other ar- business environment.4
reform efforts has shifted from eas. The government gave particular
reducing the cost and complexity SUSTAINED EFFORT
emphasis to policies and institutions
of business regulation to AT THE NATIONAL LEVEL
seen as central to enhancing productivity
strengthening legal institutions.
and growth and boosting the country’s As Colombia has improved its business
Colombia’s most notable competitiveness. As part of this, it set regulatory environment, results have
regulatory improvements have in motion reforms aimed at improving shown in Doing Business indicators—
been in the areas of starting a the regulatory framework and the rules including those on starting a business,
business, paying taxes, protecting underpinning private sector activity. The paying taxes, protecting investors and
investors and resolving insolvency. Ministry of Commerce, Industry and resolving insolvency. Indeed, thanks
While development hurdles Tourism led a coordinated reform effort to its sustained efforts, Colombia has
remain, Colombia’s regulatory bringing together government agencies, made greater progress toward the
reforms have increased its the Congress and the judiciary as well as frontier in regulatory practice since
competitiveness and have had local the private sector. 2005 than any other Latin American
and regional “spillover” effects. economy (figure 3.1).
In 2007 Colombia’s government further
institutionalized its commitment to regu- Other indicators also reflect the im-
latory reform by establishing the Private provements. The total number of newly
Council for Competitiveness. A public- registered businesses in the country
private partnership, the council is made rose from 33,752 in 2006 to 57,768
up of business associations and private in 2011.5 Colombia’s performance on
sector players working closely with the several relevant measures compiled by
government to promote sound, business- the Worldwide Governance Indicators
friendly regulatory practices.2 project improved between 2002 and
2010—including the Rule of Law Index
Recent administrations have continued (reflecting perceptions of the extent
to use national development plans to to which firms have confidence in and
establish a clear economic agenda. In abide by the rules of society) and the
2009 President Alvaro Uribe highlighted Regulatory Quality Index (capturing
Colombia’s progress and his govern- perceptions of the government’s abil-
ment’s plans for new regulatory reforms ity to formulate and implement sound
aimed at further gains in competitive- policies and regulations that permit and
ness.3 And since the change of legislature promote private sector development).6
COLOMBIA: SUSTAINING REFORMS OVER TIME 27
FIGURE 3.1 Colombia has outpaced the region in advancing toward the frontier in regulatory practice
Progress in narrowing distance to frontier since 2005 (percentage points)
5
15.3
0 10.4 10.1
9.4
8.8 8.8
Venezuela, RB
5
4.6 4.3
3.9 3.9 3.6 3.6
2.6 2.5
1.7 1.5 1.4 1.4 0.6 0.5 0.0
0 1.2 1.1 0.9 0.9
5
Colombia
Guatemala
Peru
Mexico
Uruguay
Dominican Republic
Costa Rica
Nicaragua
Honduras
Paraguay
Jamaica
El Salvador
Latin America &
Caribbean average
Ecuador
Chile
Haiti
Bolivia
Guyana
Grenada
Belize
Panama
Argentina
Dominica
St. Vincent and
the Grenadines
Brazil
St. Lucia
Suriname
-0.5 -0.5
-3.7
lombia
Guatemala Peru
Dominican
Mexico
Uruguay
Republic
CostaNicaragua
Rica
LatinHonduras
America
Paraguay
& Caribbean
Jamaica
El Salvador
average
Ecuador
Trinidad
ChilePuerto
and
Haiti
Tobago
Rico (U.S.)
Bolivia
Guyana
Grenada
St. Vincent
Belize
Panama
Argentina
and the
Dominica
GrenadinesBrazil
St.
St.Antigua
Lucia
Kitts
Suriname
andand
Nevis
Venezuela,
Barbuda RB
Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005. The measure
is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The figure shows the absolute difference for each economy between its distance to frontier
in 2005 and that in 2012. No data are shown for The Bahamas and Barbados, which were added to the Doing Business sample after 2005.
Source: Doing Business database.
And Colombia’s ranking on the ease of Choosing a reform path reforms, it first completed those aimed
doing business rose from 79 among the While Colombia simultaneously pur- at streamlining business regulation and
175 economies included in 2006 to 45 sued very different types of regulatory reducing its cost to companies. Until
among the 185 included in 2012. 2008 the focus was largely on reducing
transactions costs, such as by simplify-
ing business start-up procedures or tax
FIGURE 3.2 A trend toward stronger legal institutions and less expensive regulatory processes in
Colombia administration. These types of reforms
Average distance to frontier in sets of Doing Business indicators
have continued since 2008, but the focus
has shifted toward strengthening legal
Stronger Stronger legal institutions but more Stronger legal institutions and simpler and institutions such as bankruptcy systems
complex and expensive regulatory processes less expensive regulatory processes
and investor protections (figure 3.2).
Strength of legal institutions
8% and the number of procedures from FIGURE 3.3 Starting a business is now faster and less costly in Colombia
19 to 9 in 2011 (figure 3.3).
Procedures (number) Cost (% of income
Time (days) per capita)
The introduction and subsequent upgrades 50
70
of one-stop shops for business registration
at chambers of commerce account for 60
40
much of the change. The first one-stop 50
shops started to operate in May 2003. As
30
the changes in the start-up process yielded 40
FIGURE 3.5 Legal and regulatory changes have strengthened investor protections in Colombia imposed more stringent time limits for
negotiating reorganization agreements.
10
An electronic data interchange system Neiva’s local government also set up at boosting productivity. The steady pace
was introduced for exports, making it one-stop shops for registering new of change led to the development of the
possible to centralize electronic data. companies. This eliminated 11 procedures broader competitiveness agenda and the
The new system also allows traders to and reduced the time required to register creation of a public-private partnership
pay duties electronically, eliminating the a business from 32 days to 8. The suc- aimed at promoting business-friendly
need to go to a bank to submit payments. cess of the one-stop shops has been due regulatory practices.
And it allows shippers to share informa- largely to cooperation between municipal
tion with customs electronically, so that and national government departments. Yet despite the government’s sustained
customs declarations can be processed efforts, and its success in improving the
before the vessel even arrives at the port. Medellín is another city that substantially business climate and implementing an
Most importantly, since 2008 Colombia improved its business regulatory environ- ambitious competitiveness agenda, a
has implemented improvements to the ment. The city government cut 3 proce- number of challenges remain. Addressing
Single Window for Foreign Trade (VUCE) dures required to start a business by im- income inequality remains a key priority,
system. The system now connects over proving one-stop shops and eliminating in part because it would strengthen sup-
the requirement for a land use certificate. port in the business community and in
a dozen government agencies that are
And it made registering property easier civil society for the government’s overall
involved in import and export procedures.
by merging 2 certificates and eliminating development strategies.
a stamp previously required as proof of
SPILLOVER TO THE While the country has more development
registration tax compliance.
LOCAL LEVEL hurdles to overcome, the measures taken
Colombia has been actively reforming over the past years have greatly improved
CONCLUSION
its regulatory environment at the local its competitiveness. The regulatory
Colombia’s commitment to regulatory re-
as well as the national level. Local efforts reforms may take more time to show full
form has led to substantial improvements
have been inspired in part by a subnation- results in all areas of doing business,
in the quality of the business environment
al study. Carried out through the National but they have already led to substantial
and a more solid foundation for private
Department of Planning, the 2008 study immediate benefits. Colombia’s reform
sector development. Its experience shows
was designed to analyze the regulatory agenda is expected to continue to
the importance of sustaining reform ef-
environment in different regions with the expand—and to inspire further improve-
forts over time and adjusting them to the
aim of improving regional competitive- ments in the region.
changing needs of the economy. Initially,
ness across the country. The study was
most of the regulatory reforms took place
also intended to enable Colombian cities
at the national level. But as the business NOTES
to learn from one another and adopt good
environment continued to improve, the This case study was written by Valentina
practices from elsewhere in the country. reforms spilled over to the local level. Saltane and Hayane Chang Dahmen.
The subnational Doing Business report re- Colombia’s experience is having
1. According to the International Monetary
sulting from the study was soon followed Fund, average annual inflation in
“spillover” effects in the region as well.
by another, and work on a third began in Colombia fell from 23% in the 1980s to
Bolivia has shown an interest in learning 6% by the 2000s. Management of public
2012.10 The second report showed that more about Colombia’s experience with finances also improved, with public defi-
all 12 cities included in the first one had business entry. Paraguay has sought to cits in recent years lower as a percentage
improved on at least one Doing Business learn from Colombia’s innovations in of GDP. Colombia’s general government
indicator. construction permitting. And both Costa public debt was 35.9% of GDP in 2009,
Rica and El Salvador intend to learn from low by international standards (“IMF
Among these 12 cities, Neiva made the Data Mapper,” http://www.imf.org/).
Colombia’s trade logistics reforms.
most progress in improving the ease of
2. Consejo Privado de Competitividad,
doing business. Local authorities took Colombia’s experience also shows the http://www.compite.com.co/site/
several measures to increase the city’s importance of setting out economic sistema-nacional-de-competitividad/.
competitiveness, including creating an policy objectives. The government’s com- 3. Remarks delivered before the Americas
anti-red-tape committee to reduce the mitment to well-defined, long-term eco- Society/Council of the Americas,
regulatory burden on the private sec- nomic goals has helped drive implemen- September 24, 2009. Available at http://
tor. The committee encompassed wide tation of the reforms. Having made major www.as-coa.org/article.php?id=1908.
representation, with participants from the strides in safeguarding macroeconomic 4. International Fund for Agricultural
municipality, the chamber of commerce, stability, the government widened the Development, “Rural Poverty Portal,”
business associations and national agen- focus of its policies to include a range of http://www.ruralpovertyportal.org/.
cies such as police and tax authorities. institutional and economic reforms aimed 5. Doing Business database; World Bank
COLOMBIA: SUSTAINING REFORMS OVER TIME 31