Colombia: How to profit out of its development

Investors might find it interesting to capitalize in Colombian farming microcredits 

Colombia: How to profit out of its development

Leer en Español: Colombia: ¿cómo lucrarse de su desarrollo?

The Republic of Colombia is the northernmost nation in South America. The megadiverse country’s economy slowed down in 2015 due to the global oil shock and a general tax reform. According to the CIA, Colombia ranks as the fourth largest coal exporter, the second flower exporter, and Arabica coffee producer, as well as the fourth oil producer in the region. Other exports include emeralds, nickel, bananas, poultry, and apparel.

The Latin American country gained special attention from the international media as October 2015 marked the end of its internal conflict, the longest internal war in the world. The Colombian Government fought the Marxist guerilla FARC since 1964; the 52-year conflict killed around 260,000. Nearly 4 years passed before an agreement was reached between the two parts.

According to UNHCR, 6.94 million Colombian citizens were forced to leave their homes due to the conflict. The South American country ranked #1 in the infamous list surpassing Syria, Iraq, and Sudan. Continued displacement was a tactic used by the FARC guerilla in order to capture resources either from the land they took or by kidnapping its owners.

The central government faces tough challenges regarding the incorporation of the victims in society; it remains uncertain whether these people will go back to their lands or stay within the cities that they sought as haven. The challenge resides on newer generations of urban-oriented children that hold no interest in farming.

Colombia has an average unemployment rate of 9% that is not expected to change until 2022. Said figure is in no way advantageous as the national workforce increases every day, meaning unemployment in the area is on the rise. The South American nation possesses a workforce advantage, which can be capitalized.

The Latin American nation is fertile ground for microcredits; the banking practice involves giving a loan to an impoverished community in order to develop and sustain a business. The original pilot was held in Bangladesh in 1976 and the overall market worldwide grosses 38 billion dollars and has involved 74 million people.  

Investors might find it interesting to spend in Colombian farming microcredits as the country hosts ideal conditions for agricultural development, plus it is forming close ties with food-demanding nations such as South Korea. The national government allows interest rates over microcredits of 55.1% as of September 2017.

A greater extent of investors could be interested in Colombia’s export-oriented microcredits if the income generating assets could be wrapped into discrete branches. Doing so would create a Collateralized Debt Obligation with a microcredit backing in order to provide safer opportunities for risk-averse and socially oriented lenders.

 

 

Latin American Post | David Eduardo Rodríguez Acevedo

Copy edited by Susana Cicchetto

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