Increase productivity in Colombia, an urgent task

“Productivity is not everything, but in the long run it is almost everything.”

Paul Krugman[1]

Colombia is experiencing a difficult economic situation characterized by low rates of economic growth, limited levels of domestic demand and little dynamics of the external sector. Although the situation is less serious than that of many other countries in the region, it is not without concern the poor dynamics of the economy after the fall in commodity prices and the end of the boom in mining-energy products.

In moments of crisis people seeks to identify possible culprits that may have led the country to the current circumstances and, in addition, to find magical solutions that allow a “quick and safe economic recovery”. These short-term analyzes have led us to conduct short-term studies which have not made it possible to identify the structural causes of the country's economic problems. However, in recent years there has been a broad consensus from different perspectives of economic analysis on the main factor affecting the economic growth of the country: productivity (see BID, 2010 y CPC, 2017).

Colombia ranked 61 among 140 economies in the sample of the global competitiveness index 2016-2017, and is in the fifth place among the Latin American countries included in this "ranking" (The Global Competitiveness Report 2016-2017). It is the same place that it occupied in the previous report (GCI 2015-2016) and the situation has not varied much in the last ten years. Beyond this, different studies have shown that the country's productivity has remained stagnant since the 1980s, and even has been reduced in some sectors of the economy (see GRECO [2005]; Echavarría, et al. [2006]; Kehoe [2007]; Eslava y Meléndez [2009], and Eslava et al. [2013], among others).

This allows to explains largely the country economic situation in the recent years. According to Eslava (2017) in Colombia five times more workers and machinery are needed to produce the same added value than in the United States. There is a large gap in domestic productivity levels and those in developed and emerging economies in different regions of Latin America. Therefore, we have a significant backlog that prevents us from being competitive internationally, and to have stable economic increase based on a permanent productivity growth.

In simple terms, greater productivity means doing more with the same, Generate a greater output making a more efficient use of the same amount of inputs and production factors (labor, capital, human capital, land, etc.). This calls for greater efficiency in multiple dimensions at both the macroeconomic and enterprise levels. These include higher levels of education and health, better infrastructure, legal and institutional stability, transparency in markets, better management practices, development of new productive and organizational processes, academic-business alliances and, above all, innovation, a lot of innovation and development.

Raising levels of productivity is an urgent task for the country. Higher levels of productivity lead to permanent and stable growth in the long term. This leads to an increase in income in the country, greater competitiveness and dynamics of the external sector, better government fiscal performance, less environmental deterioration and higher welfare levels for the entire population.

Iader Giraldo Salazar




[1] Nobel Prize in Economics 2008.