Working together: Colombia and the IMF

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The publication "Colombia: Peace is Good for Business" (September 2018) describes how collaboration between Colombia and the IMF supported economic stabilization, fiscal reform, and initiatives to translate the 2016 peace deal with FARC into broader development and investment opportunities.
Key human context: Jennifer Mosquera Quejada, a 24-year-old single mother, found stable work at a Telefonica call center in Quibdo (a city of 100,000), illustrating local labor-market impacts.

Colombia and the IMF began formal collaboration in 1999 when the IMF provided a $2.7 billion loan to help overcome a severe recession.
Reforms following 1999 included adoption of a flexible exchange rate and an inflation target that together helped restore credibility with international markets.
In 2009, Colombia qualified for a $10.5 billion flexible credit line; Colombia did not draw on it, but the credit line reassured international investors.
The publication credits the IMF-supported reforms with helping Colombia weather the global financial crisis and later shocks.

The collapse of oil prices in 2014 cut export earnings in half and chopped 20 percent off government revenue.
The trade deficit widened to a record level in 2015.
The flexible exchange rate acted as a shock absorber: the peso weakened, imports declined, and the trade deficit narrowed.
Imported goods price increases contributed to inflation that peaked above 8 percent in mid-2016.
The central bank relied on its 3 percent inflation target and raised interest rates to bring inflation down.

In 2016 the government carried out an ambitious overhaul of Colombia’s tax system, planned with IMF technical assistance.
The reform aimed to plug the budget hole from lower oil revenue and to modernize a tax code with high corporate rates, low overall revenue, and rampant tax evasion.
December 2016 congressional actions included:
- Simplifying the corporate tax structure and lowering corporate tax rates.
- Raising the Value Added Tax to 19 percent from 16 percent.
- Strengthening training and staffing at the tax authority and enacting stiffer penalties for tax evasion.
The reform was intended to generate funds for a rural development program estimated to cost $42 billion over 15 years.
Andres Escobar (deputy finance minister under Santos) is quoted: “Without this tax reform, it would be impossible to make good on the pledges in the peace agreement.”

The 2016 peace deal with FARC commits the government to build roads, schools, and aqueducts to create jobs and improve quality of life in formerly conflict-affected areas.
The reform created incentives for investment in rural areas formerly controlled by guerillas, addressing the urban-rural income disparity in a country of 50 million people.
Business and sector responses noted in the publication:
- Roberto Velez, National Federation of Coffee Growers, highlights potential as new lands open for cultivation; coffee cultivation directly or indirectly supports 7 million Colombians.
- Antonio Celia, CEO of Promigas and member of the Business Council for Sustainable Peace, is studying solar-panel projects for remote areas to employ former guerillas and provide energy where natural gas connections are lacking.
- Telefonica’s 150-worker call center in Quibdo is the city’s largest employer and spurred local employment opportunities.

The publication presents the following linked policy and outcome observations:
- IMF technical assistance and fiscal reform restored fiscal credibility and enabled financing for peace-related rural investment.
- Flexible exchange-rate policy and an inflation-targeting regime were central to absorbing external shocks without causing a recession.
- Strengthened tax administration and higher VAT were important to increase revenue and reduce evasion, enabling long-term commitments under the peace accords.
- Private-sector investment and targeted projects (communications, energy, agriculture) are portrayed as complementary to public spending in consolidating peace and creating jobs.