History, Politics, Economy and Startups in Colombia.
Colombia is the country which exists in a permanent state of conflict with itself.
It has six distinctly different geographical regions. It also possesses one of the most ethnically and linguistically diverse populations in the World. On top of that Colombia has served as the gatekeeper for North and South Americas as well as for Atlantic and Pacific Ocean costs. Those extreme geographical and demographic diversities as well as its strategic location predefined disagreeable and hostile character of internal and external political lives for Columbia.
Columbia gained its independence from Spain more than 200 years ago in 1812. Since then different political factions with their distinct ideologies representing different population groups had been in almost permanent state of conflict which sometimes took an extremely violent, military character.
On its first year of independence, proclaimed on 20 July 1820, the United Provinces of New Granada(territory which included future Colombia) saw two clashing political currents rising withing the liberators movement, those of federalist and centralist. Soon, in 1830, internal conflicts lead to disintegration of this state and to formation of the new ones: New Granada, Ecuador and Venezuela.
However, it didn’t pacified the region. In 1863 the Civil War erupted in New Granada. It had lasted two years and led to foundation of the United States of Colombia, later, in 1866 renamed to the Republic of Colombia.
The beginning of the 20th century only brought new, more severe conflicts to Colombia. In 1903 USA took the newly formed state of Panama out of Colombian territory paying $25 million to the government. In 1932 7-months Leticia War with Peru was fought for the piece of Amazon’s jungle. Finally, year 1948signified the start of bloody internal war (called La Violencia) between two leading political parties in Colombia — Conservative and Liberal. It lasted ten bloody years to 1958, and, as its name suggested, led to massive losses for its participants as well as for the civilian population. On top of that, in 1950, Colombia entered into the Korean War on the side of USA.
Against such historical background it had been of no surprise that in 1960th more of new militarized political groups were formed and among them one which soon would take the front line of non-stop guerrilla war in Colombia — Marxists-Leninist Fuerzas Armadas Revolucionarias de Colombia — Ejército del Pueblo, FARC–EP. That war (fought mostly in rural regions of the country) has lasted for more than 50 years and still continues in our days (from 2000th with far less intensity) despites all efforts to bring it to the end. The latest void attempt was made on the Referendum held on 3 October 2016 when voters by narrow margin rejected the FARC peace deal.
1960th, 1970th and early 1980th were not only periods in World’s history when ideological struggle between socialism and capitalism reached its climax but also when Colombia Cocaine monopoly emerged, grew and proliferated. As neighboring countries, pushed by USA, tightened their anti-drug legislation and strengthened their police forces Colombia government was not able to control part of its territory covered by jungles and ideal for coca crops. This situation was exploited by dealers from both USA and Colombia to build one of the most profitable illicit enterprises in the history of capitalism. It is suggested that in 1990th — 2000th revenues of Colombia cartels from drug trade have reached more than $10 billion per year.
Its mineral base and unique geographical position have made Colombia very attractive for international investors. However, the on-going military conflict has posed severe restrains on business activities in the Republic. Periodically, when the intensity of war diminishes Colombia starts to experience the economic boom which puts it on a hot list for World’s biggest Investment Funds. Since the beginning of 2000th Colombia’s GDP growth rate averages 4% per year. Most of this growth is due to large scale mineral resources extraction projects (primary of oil). Colombia was also named “the Silicon Valley of South America” for its support of innovative technologies specifically those with potential militaryapplications.
Colombia today is the country where government is struggling to eradicate the national sport of waging perpetual internal warfares.
Colombian high-tech entrepreneurs have gotten for themselves the promising but, at the same time, very specific spot. In the past couple of decades Columbia (together with Mexico) had became one of the major internal producers of the consumer electronics. It now constitutes one of the major local markets for Colombian startup founders.
Colombia had traditionally been economically over-dependent of its oil industry, with its more than 600 millions barrels per day of production. Still oil constitutes more than 40% of Country’s exports. With all commodities prices in downfall, Colombian economy has entered a turbulent waters (GDP growth rate has slowed to 1% in 2017).
Additionally, Colombia is socially divided to several regions with drastically different levels of living. It presents a major challenge for local outside of Bogata. On top of that, Columbia is one of the most unequal societies in the World, which makes it very difficult for local entrepreneurs to cash in on the majority of Columbian impoverished population. At the same time, Colombian mining and manufacturing industries remain highly concentrated. That makes B2B business dependent on such volatile conditions as personal relationships.
Another serious obstacle to building productive startup ecosystem in the country is serious security concerns. Columbia still stays on top of the list of most dangerous countries to live. That negatively affects local investment climate.
In the recent years Columbian government has put a great amount of work to improve this situation and that promises more brighter future for Columbia startup culture.
Business Notes for Startups Founders:
- political climate: moderately friendly ;
- economic climate: not friendly ;
- regions to focus: local, Latin America;
- industries to focus: electronics, E-commerce, entertainment, FinTech, tourism, luxury;
- major limitations: slowing economy, over dependence on oil, security situation, large income disparity between different social group, low level of income for majority of population, high taxes;
- opportunities: favorable geographic position, developed electronics industry, existence of very wealthy class of citizens, relatively high Internet penetration rate (growing at 5%).