This is how foreign direct investment in Colombia behaved during the first half of 2022

September 9, 2023

Foreign direct investment flows into and out of the country make it possible to distinguish the sectors and countries that are relevant to the national economy. The main origin is the United States and the main destinations are the mining and services sectors.

foreign direct investment, foreign investor, investor, business investment, Más Colombia

Foreign direct investment in Colombia and in any country in the world represents resources that can help economic development. It is the task of governments to channel it to boost the sectors that are considered strategic and to strengthen national development projects.

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Data from Banco de la República show that foreign direct investment in Colombia amounted to USD $16,869 million during 2022, equivalent to 4.9% of the annual Gross Domestic Product (GDP).

These foreign direct investment flows to the country are still low. The United States, which is the largest recipient of foreign direct investment, received $285,057 million in 2022 (1.4% of GDP), according to the United Nations Conference on Trade and Development (Unctad).

Despite representing a higher percentage of Colombia’s GDP, foreign direct investment flows to the country are scarce and are concentrated in service and extractive industry activities, which reinforces the primary-export model.

To which sectors does foreign direct investment flow into Colombia?

The breakdown of FDI shows that the financial and business services sectors attracted 33% of total investments in 2022, with a total of USD $5,609 million, according to data from the Bank of the Republic. In second place, the mining and oil sector received USD $4,429 million, accounting for 26% of the total flow.

The transportation, storage and communications sector ranked third, attracting USD $1,789 million and representing 11% of FDI in 2022. In other words, foreign direct investment coming into the country is mainly concentrated in the tertiary sector and extractive industries.

What is the origin of foreign direct investment coming to Colombia?

Regarding the countries of origin of foreign direct investment in Colombia. The United States led the ranking, with a 29.5% share and a contribution of USD $4,973 million, according to Banco de la República. Spain ranked second with 16.2% (USD $2,737 million), followed by Panama in third place with USD $1,978 million (11.7%).

Foreign direct investment from countries with which Colombia has trade agreements accounted for 72.9% of total FDI in 2022, according to the Ministry of Commerce, Industry and Tourism.

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Colombia also invested abroad in 2022

Just as Colombia receives investment from other countries, it makes investments abroad. In 2022, Colombia invested around USD $3,402 million abroad. Brazil was the main destination, with USD $530 million (15.6%), followed by Chile with USD $497 million (14.6%) and the United States with USD $496 million (15%).

The weight of the regional economy for Colombian direct investment flows abroad and the strong relationship with the United States is evident.

Financial and business services accounted for 46% of investments abroad during 2022, close to USD $1.56 billion. It was followed by electricity, gas and water with USD $1,417 million, according to data from Banco de la República.

With data from the same Bank, it is found that in the mining and quarrying sector, investments abroad were made for USD $687 million (20%). This was the third sector with the highest foreign direct investment from Colombia abroad.

Thus, the country invests abroad mainly in services and extractive industries.

How did foreign direct investment in Colombia start in 2023?

Foreign direct investment in Colombia during the first semester of the year 2023 showed a decrease of USD $478 million with respect to the same period of the immediately preceding year, according to information from Banco de la República.

The country went from receiving USD $10,039 million, between January and June 2022, to receiving USD $9,561 million in the same period of 2023. The central bank explains that the decrease is due to lower foreign direct investment in Colombia from Chile, Panama, Spain and Mexico.

It is still a pending task to encourage foreign direct investment in the country, deconcentrate it from the services sector and extractive industries and channel these flows to the productive sector.

This is important for foreign direct investment to be useful for the generation of added value in the country, through the injection of capital and the transfer of technology. In this way, both national technical development and value-added exports can be promoted.