Historical background

Colombia was one of the three countries that emerged from the collapse of Gran Colombia in 1830 (the others are Ecuador and Venezuela). A four-decade long conflict between government forces and anti-government insurgent groups, principally the Revolutionary Armed Forces of Colombia (FARC) heavily funded by the drug trade, escalated during the 1990s. The insurgents lack the military or popular support necessary to overthrow the government and violence has been decreasing since about 2002, but insurgents continue attacks against civilians and large areas of the countryside are under guerrilla influence or are contested by security forces. More than 31,000 former paramilitaries had demobilized by the end of 2006 and the United Self Defense Forces of Colombia (AUC) as a formal organization had ceased to function. In the wake of the paramilitary demobilization, emerging criminal groups arose, whose members include some former paramilitaries. The Colombian Government has stepped up efforts to reassert government control throughout the country, and now has a presence in every one of its administrative departments. However, neighboring countries worry about the violence spilling over their borders.

Economic overview

Colombia has experienced accelerating growth between 2002 and 2007, with expansion above 7% in 2007, chiefly due to advancements in domestic security, to rising commodity prices, and to President URIBE's promarket economic policies. Colombia's sustained growth helped reduce poverty by 20% and cut unemployment by 25% since 2002. Additionally, investor friendly reforms to Colombia's hydrocarbon sector and the US-Colombia Trade Promotion Agreement (CTPA) negotiations have attracted record levels of foreign investment. Inequality, underemployment,and narcotrafficking remain significant challenges, and Colombia's infrastructure requires significant updating in order to sustain expansion. Economic growth slipped in 2008 as a result of the global financial crisis and weakening demand for Colombia's exports. In response, URIBE's administration has cut capital controls, arranged for emergency credit lines from multilateral institutions, and promoted investment incentives such as Colombia's modernized free trade zone mechanism, legal stability contracts, and new bilateral investment treaties and trade agreements. The government has also encouraged exporters to diversify their customer base away from the United States and Venezuela, Colombia's largest trading partners. Nevertheless, the business sector continues to be concerned about the impact of a global recession on Colombia's exports, as well as the approval of the CTPA, which is stalled in the US Congress.