Unlocking regional prosperity: How Colombia can bridge economic gaps

by Michael Koelle, Aida Caldera Sanchez and Paula Garda, OECD Economics Department.

Also available in Spanish.

Tackling regional disparities in productivity in Colombia is crucial to improving living standards and ensuring economic wellbeing for all Colombians. Colombia’s regional gaps in GDP per capita are among the highest in the OECD (Figure 1), largely driven by deep-rooted differences in productivity, as highlighted in the recent 2024 OECD Economic Survey of Colombia. These disparities have developed over many years, exacerbated by decades of conflict, unequal access to infrastructure, education, training, labour market opportunities, and institutional weaknesses.

Figure 1. Colombian regions differ widely in their GDP per capita

Note: GDP per capita is for large TL2 regions (departamentos in Colombia) and for 2022 or the latest year available.

Colombia faces a unique opportunity to boost its economy and ensure that every region benefits. Global shifts like changing trade patterns, nearshoring, and the green transition present challenges, but also big opportunities. The Colombian government has made regional development a key part of its plan to revitalize, diversify and transform the economy. To seize this moment and bring prosperity to all regions, the 2024 OECD Economic Survey of Colombia outlines a set of strategic policy actions:

1. Upgrade infrastructure for better connectivity: Colombia’s infrastructure has long been held back by under-investment, conflict, and its rugged geography. For example, it can take over eight hours to drive the 250 km between Bogotá and Medellín. While national roads have seen some recent improvements thanks to public-private partnerships, the next step is to develop and connect ports, rivers, railways, and roads more efficiently. Additionally, improving rural roads is critical for linking remote communities to nearby cities and markets.
2. Cut red tape for businesses: High administrative costs and complex regulations make it tough for businesses, especially small ones, to thrive in Colombia. Expanding digital one-stop shops for permits and licenses to more municipalities, including more procedures and digital payment options, particularly in remote areas, would help more small businesses formalize, create jobs, and contribute to local economies.
3. Equip young adults with job-ready skills: Many young adults leave school without the skills they need to succeed in the workforce, especially in rural areas where schools are far away. Upper-secondary vocational training programmes (VET) have been a lifeline for many, offering valuable skills and good outcomes. Expanding these programs in vulnerable regions where educational options are limited can help bridge the gap between school and work.
4. Strengthen subnational governments capabilities and finances: Many subnational governments, especially local authorities in remote and rural areas, struggle with limited fiscal and administrative capacity. A reform to strengthen fiscal equalisation mechanisms and to enhance direct tax collection would improve fiscal capacities. The ongoing implementation of the multipurpose land registry is an important step along this way. Administrative capacity building should go hand in hand with delegation of authority, clarifying spending responsibilities, and improving intergovernmental coordination. These recommendations are in line with recommendations from Colombia’s decentralisation commission.
5. Fight corruption, especially in rural areas: Corruption hits Colombia’s poorest and most rural regions hardest, eroding trust and blocking progress. Strengthening regulations on private political campaign funding, better protecting civil society leaders, and improving transparency in financial transactions are critical steps to ensure that progress benefits all Colombians.
6. Implement the Peace Agreement to boost rural development: The 2017 Peace Agreement opened the door for growth in areas long affected by conflict, especially in rural regions. By improving infrastructure and ensuring peace, these areas can participate in trade and benefit from Colombia’s strong tourism. However, the pace of implementation has been slow, and more resources are needed to fully realise the benefits of peace.
   

Closing the prosperity gap between Colombia’s regions is essential not only for regional equality but also for boosting the country’s overall productivity. By improving infrastructure, reducing barriers to business, and empowering local governments, Colombia can build a brighter future where every citizen—no matter where they live—can share in the country’s growth and success.

Reference

OECD (2024), OECD Economic Surveys: Colombia 2024, OECD Publishing, Paris, https://www.oecd.org/en/publications/oecd-economic-surveys-colombia-2024_a1a22cd6-en.html.