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Colombia Balance of Payments
The Colombian balance of payments paralleled overall
trade and
economic trends, fluctuating from a surplus in the late
1970s to a
deficit in the early 1980s, only to rebound strongly in
1986. The
reasons for these swings ranged from changes in domestic
production
capabilities to external factors such as the international
price of
coffee and the health of Colombia's export markets (see
table 12,
Appendix).
Following the coffee boom years, Colombia found itself
with
unusually high levels of foreign exchange reserves. These
reserves
grew to US$4.6 billion by 1980. From 1981 to 1983,
however,
Colombia experienced a turnaround in its reserves balance,
owing to
deficits in both merchandise trade and services. Capital
receipts
were insufficient to cover the shortfalls in the current
account,
and Colombia was forced to draw down its reserves. To
mitigate the
effects of this action, Colombia imposed import controls
and
continued to devalue the peso, which eventually caused a
reduction
in the import bill in 1985. At that time, manufacturing
production
was recovering and coffee prices were rising, which once
again
produced a credit balance in merchandise trade.
From 1984 through 1987, the services account, by
contrast,
remained in deficit each year by some US$2 billion. This
resulted
from lower interest income on the reduced foreign reserves
balance,
a decline in tourist receipts, and reduced remittances
from
Colombian laborers working abroad, particularly in
Venezuela. In
addition, Colombia had higher interest payments on both
private and
public debt. Although there were signs that the services
account
might improve in the late 1980s, many analysts expected it
to
remain negative well into the 1990s.
In the 1980s, the trade and services imbalances
combined to
generate annual long-term current account deficits, with
the
exception of 1986. Although this was a major problem
during the
recession years of the early 1980s, when debt and equity
capital
were scarce, Colombia traditionally covered its current
account
deficit with capital inflows. This was again the case from
1985 to
1987, when Colombia recorded a positive difference between
longterm capital and the current account--sometimes referred
to as the
basic balance. Although Colombia's ability to attract
foreign
capital counterbalanced the current account deficits, it
also
threatened the national economy with even higher current
account
deficits in the future because more funds would have to be
set
aside to service the expanding debt.
Data as of December 1988
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