All in for Industry

Industry’s Economic Contribution

After the 2017 economic slowdown, 2018 will see an upward turn, with many sectors, including industry, leading the charge.

So far in 2018, Colombia is seeing an economic upturn thanks to the performance of some key sectors including financial services, construction, gas, and water, which gained a positive variation up to 3% during the year. According to the World Bank and OECD, Colombia’s industry will strengthen throughout the year. These projections show a positive environment that, according to the Minister of Finance, Mauricio Cardenas, “reinforce the government’s certainty that the country has engaged a path of clear and resilient recovery.”

The World Bank reported a decline in industrial production in 2017, largely due to a slowdown in the extractive industries including gold, platinum, and silver. In 2016, the mining sector shrank by 6.5%. Also in decline were oil and gas production as well as textile and beverage manufacturing. However, Coca-Cola Colombia is confident better years are ahead, especially with increased marketing around the 2018 World Cup, according to Coca-Cola President Roberto Mercadé.
As far as players in the mining segment are concerned, the biggest impediment to extractive and industrial growth is legal uncertainty. The Colombia Mining Association has been quite vocal, arguing the right legal conditions could spur between USD1.5 and 1.7 billion in investment per year, or a total of USD7.5 billion over five years. The President of the Colombia Mining Association is quite confident with gains in copper exploration and has high hopes for adding copper into the country’s industrial input mix, while gold and coal remain the most significant sub-sectors.
Charles C. Burgess, Director of Mineria Texas Colombia, emphasized to TBY the importance of mining to the economy and its recognition via conducive investment legislation is in the interests of the Colombian people.
Moreover, the macroeconomic activity of the country has contributed to some positive results. The reduction of the interest rates, higher oil prices, 4G infrastructure projects, and more positive consumer behavior have and will follow the positive path Colombia has started. Colombia’s national government is betting on 2.7% GDP growth in 2018. In order for this to happen, the new administration will have to learn from the previous mistakes and put into practice all the possible machinery to keep boosting the economy.
Industry will be a sector of strong focus. Although in the last quarter of 2017 it saw a contraction of 1.7% and only 13 of 39 sub-sectors increased their production scale, one of the admirable sub-sectors was paper and cardboard, which grew at a rate of 4.4%.
Isabel Riveros, Director of the Chamber of Paper and Cardboard of the National Business Association on Colombia, said that entrepreneurs in this sector, seeing that domestic demand was depressed both by the VAT increase and the generalized slowdown in the economy, chose to search for new niches abroad. Riveros mentioned, “The growth of this segment has been, in general, due to paper exports, with its new destinations: Central America, the Caribbean, Ecuador, and the US.”
Another boost for packaging was the uptick in agriculture. New products such as avocado and pineapple, which complemented the traditional bastions of the agriculture sector—flowers and bananas, require cardboard packaging. Indeed, in 2017, agriculture saw nearly 5% growth as effects from El Niño subsided and the livestock sector expanded. Growth in the agriculture and agro-industry sectors is expected to continue as effects from the peace deal come into play. Given the knock-on effects of growth in tangential sectors, a keen eye to boosting industry and industrial investment throughout the supply chain would seriously bump up Colombia’s growing—yet still somewhat sluggish—GDP. Implementation of the peace deal and political stability following the 2018 elections should prove to be crucial factors for industrial output and the economy.