Colombia’s competitiveness fell: government inefficiency and poor business infrastructure among main reasons

August 3, 2023

Colombia’s competitiveness falls year after year, according to the World Competitiveness Yearbook. This year, our country ranked 58th out of 64. Aspects such as reduced government efficiency and poor infrastructure explain the results.

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Have you ever wondered why other countries do better exporting if Colombia is a country rich in natural resources and has an industrious population? Well, Colombia’s reduced competitiveness is an important part of the explanation. The country’s structural conditions are not the best when compared to other nations in the world.

Colombia’s competitiveness is below that of many countries, according to a ranking published by the International Institute for Management Development (IMD). Even worse, in recent years Colombia has worsened in comparison with similar countries.

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Colombia’s competitiveness is falling

Since 1989, the IMD, a leading business school, has published every year the World Competitiveness Yearbook (WCA), which includes the ranking of the world’s countries. The 2023 ranking takes into account 64 countries and evaluates economic performance, government efficiency, business efficiency and infrastructure.

Year after year, Colombia’s competitiveness is lower compared to other countries. In the 2010 Yearbook, the country was ranked 45th out of 58, so only 22% of the countries evaluated were below Colombia. In 2023, Colombia ranked 58th out of 64, so only 10% of the countries were below ours.

Since 2019, Colombia has been steadily losing places in the ranking. That year, the country was number 52 in competitiveness; in 2020, it fell to 54; in 2021, to 56; in 2022, to 57th place; and in 2023, to 58th. At the continental level, Colombia’s competitiveness went from being the fifth highest in 2019 to sixth in 2023.

Economic performance

This is the aspect in which Colombia is doing the best. In economic performance the country ranks 37th among the 64 evaluated in 2023. It also shows a significant improvement in the last 5 years, given that in 2019 it was ranked 50th.

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Colombia’s good competitiveness in this dimension is mainly due to the fact that the cost of the cost of living basket, the price of renting real estate and the price of gasoline are lower compared to other countries. The CMA shows that the lack of employment in Colombia is one of the major symptoms of the economy’s poor performance.

Government efficiency

The main reason for Colombia’s low competitiveness is poor government efficiency. In this dimension the country ranks 61st out of 64. In this aspect it has worsened since 2019, when it ranked 56th. In the last three years, government efficiency is the dimension that leaves the country worst in the CMA.

Colombia fares very poorly in social structure, one of the variables that measures government efficiency. High homicide rates, marked inequality, lack of justice and limited opportunities explain why the country ranks second to last in the 64th in social structure. Business legislation and institutional structure are also deficient.

Business efficiency

In this aspect Colombia improved compared to last year, but is worse than 5 years ago. In 2019, the country ranked 47th in business efficiency, while in 2023 it is number 59. The biggest drop occurred from 2021 to 2022, when it lost 9 positions, going from 51st to 60th.

Colombia’s competitiveness is reduced in this aspect, mainly due to the finance variable. Our country is not doing well in areas such as the regulation of shareholders’ rights or corporate indebtedness. According to the IMD, the attitudes and values of the Colombian population do not favor business efficiency either.

Infrastructure

Infrastructure refers to the conditions needed for business to move forward. In this factor, the country has scored poorly in the last five years. In 2023 Colombia ranked 57th in this aspect, while in previous years it had ranked 56th, with the exception of 2021, when it ranked 53rd.

The reason for Colombia’s low competitiveness in this aspect is largely explained by the low score in the education variable. The country is also doing poorly in technological infrastructure, a variable in which it went from 50th place in 2022 to 56th place in 2023.