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Total Government Expenditures |
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Economic Freedom Rating |
As A Percent of GDP |
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 |
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Part 1: The Economic Freedom Ratings for the Components and Various Area and |
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Summary Indexes: 1975, 1980, 1985, 1990 and 1995. |
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(The numbers in parentheses indicate the actual values for the components.) |
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Components of Economic Freedom |
1975 |
1980 |
1985 |
1990 |
1995 |
|||||||||
I. Money and Inflation |
1.6 |
2.0 |
5.5 |
3.0 |
6.3 |
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(a) Annual Money Growth (last 5 yrs.) |
1 |
(20.9) |
1 |
(28.9) |
2 |
(20.4) |
1 |
(28.9) |
1 |
(26.2) |
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(b) Inflation Variablity (last 5 yrs.) |
4 |
(5.7) |
5 |
(4.2) |
9 |
(1.7) |
8 |
(2.2) |
7 |
(2.5) |
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(c) Ownership of Foreign Currency |
0 |
0 |
10 |
0 |
10 |
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(d) Maint. of Bank Account Abroad |
0 |
0 |
0 |
0 |
10 |
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II. Government Operation |
7.5 |
6.4 |
6.0 |
6.3 |
4.6 |
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(a) Gov't Consump. (% of Total Consump.) |
9 |
(11.0) |
9 |
(12.6) |
8 |
(13.4) |
8 |
(13.6) |
1 |
(28.4) |
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(b) Government Enterprises |
6 |
4 |
4 |
4 |
6 |
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(c) Price Controls |
- |
- |
- |
6 |
5 |
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(d) Entry Into Business |
- |
- |
- |
- |
7.5 |
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(e) Legal System |
- |
- |
- |
- |
0.0 |
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(f) Avoidance of Neg. Interest Rates |
- |
- |
- |
8 |
8 |
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III. Takings |
6.0 |
4.1 |
5.1 |
6.5 |
6.5 |
|||||||||
(a) Transfers and Subsidies (% of GDP) |
8 |
(3.0) |
8 |
(2.9) |
7 |
(4.4) |
7 |
(3.7) |
7 |
(4.1) |
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(b) Marginal Tax Rates (Top Rate) |
6 |
(41) |
2 |
(56) |
5 |
(49) |
8 |
(30) |
8 |
(30) |
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(c) Conscription |
0 |
0 |
0 |
0 |
0 |
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IV. International Sector |
2.0 |
2.3 |
2.4 |
2.5 |
5.0 |
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(a) Taxes on International Trade (Avg.) |
3 |
(7.4) |
3 |
(7.8) |
3 |
(7.5) |
3 |
(7.1) |
6 |
(4.0) |
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(b) Black Market Exchange Rates (Prem.) |
3 |
(29) |
4 |
(16) |
5 |
(9) |
4 |
(17) |
5 |
(7) |
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(c) Size of Trade Sector (% of GDP) |
2 |
(14.9) |
2 |
(15.9) |
1 |
(13.2) |
3 |
(17.7) |
3 |
(18.4) |
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(d) Capital Transactions with Foreigners |
0 |
0 |
0 |
0 |
5 |
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Economic Freedom Rating |
4.2 |
3.6 |
4.6 |
4.8 |
5.5 |
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Ranking of Country |
44 |
68 |
37 |
43 |
58 |
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Part 2: Recent Economic Indicators: |
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Population 1996: |
35.7 |
Real Per Capita GDP |
: |
1996= |
$5,310 |
|||||
(in millions) |
(in 1995 U.S. dollars) |
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Annual Rate of Change (1985-96): |
2.1% |
Avg. Growth Rate: |
1980-90= |
1.2% |
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1990-96= |
2.0% |
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Economic Indicators:* |
1988 |
1989 |
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
|
Change in Real GDP: Aggregate |
4.1 |
3.4 |
4.3 |
2.0 |
4.0 |
5.4 |
5.7 |
5.3 |
2.4 |
|
: Per Capita |
2.0 |
1.3 |
2.2 |
-0.1 |
1.9 |
3.3 |
3.6 |
3.1 |
0.3 |
|
Inflation Rate (CPI) |
28.1 |
25.8 |
29.1 |
30.4 |
27.0 |
22.6 |
23.8 |
21.0 |
20.0 |
|
Change in Money Supply: (M1) |
25.7 |
- |
- |
31.7 |
44.3 |
27.7 |
27.4 |
23.1 |
16.5 |
|
: (M2) |
21.6 |
- |
- |
20.8 |
45.0 |
37.5 |
34.6 |
21.7 |
14.6 |
|
Investment/GDP Ratio |
22.0 |
20.0 |
18.5 |
16.0 |
17.2 |
21.2 |
21.1 |
21.1 |
- |
|
Size of Trade Sector (% of GDP) |
15.1 |
15.9 |
17.7 |
17.3 |
17.7 |
18.3 |
17.8 |
18.4 |
- |
|
Total Gov't Exp./GDP Ratio |
14.1 |
15.1 |
15.5 |
16.7 |
21.5 |
17.2 |
20.0 |
16.6 |
- |
|
Central Government Budget |
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Deficit (-) or Surplus (+) |
||||||||||
As a Percent of GDP |
+0.3 |
-0.4 |
-0.1 |
+0.3 |
0.0 |
+0.3 |
+0.4 |
1.9 |
- |
|
Unemployment Rate |
- |
8.9 |
10.2 |
9.8 |
10.3 |
8.7 |
8.9 |
8.9 |
11.7 |
a |
* The figures in the table above are in percent form. |
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a June, 1996. |
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While Colombia’s rating has improved slightly, its ranking has actually declined because other countries have moved more rapidly toward liberalization. In 1995 it ranked 55th (among 115 countries), down from 37th in 1985 and 44th in 1975. It has ranked among the middle group of countries throughout the last decade.
Clearly the moves toward economic freedom have been modest. There has been some deregulation. Citizens are now permitted to maintain foreign currency bank accounts. Restrictions on the mobility of capital have been liberalized a little and there has been some privatization of state enterprises. But there is no comprehensive plan for economic liberalization. The government continues to regulate prices in several areas and impose exchange rate controls. Monetary growth continues at a rate that is far too expansionary for the achievement of price stability (a low and stable rate of inflation). Perhaps the major weakness of this economy is the absence of rule of law principles. Laws are often complex and ambiguous, which provides government officials with substantial discretionary authority. Not surprisingly, this authority is often exercised in a discriminatory manner and the process breeds corruption.
Among Latin American nations, Colombia has had one of the stronger rate of economic growth during the last 15 years. Deregulation of markets, reform of the legal structure, and adoption of policies (and institutions) consistent with monetary and price stability would greatly improve the performance of this economy and lay the foundation for solid growth and prosperity.
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| Last Modified: Wednesday, October 20, 1999. |