By Thomas Kostigen
SANTA MONICA, Calif. (MarketWatch) — Over the years, Colombia has gotten a pretty bad reputation for itself. The country is infamous for its association with cocaine and illegal drug trafficking. This activity, in turn, incited violent crime. And its most recent bout with infamy involves prostitutes and the U.S. Secret Service.
Despite all these run-ins with the law, Colombia is a shining star among developing world countries. In fact, many say it is the “new Brazil,” meaning it is on a path of strong economic growth.
Strong governance, environmental standards and social entrepreneurship make this country a ripe opportunity for impact investors seeking to garner financial returns and engender social change.
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Indeed, the new trade agreement with the U.S. (lost among the hullabaloo over the Secret Service affair) should excite investors of all types.
According to the Central Intelligence Agency’s World Factbook, “Colombia’s consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to face external shocks. Real GDP grew 5.7% in 2011 and inflation ended 2011 at 3.7%, continuing almost a decade of strong economic performance. All three major ratings agencies have upgraded Colombia’s investment grade.”
Meanwhile, more than half of Colombia’s population lives below the poverty line, according to the Schwab Foundation for Social Entrepreneurship. Income inequality, it says, is one of the highest in Latin America, and social conditions are extremely poor in many regions.
To be sure, Colombia has its vulnerabilities. It depends heavily on oil exports, infrastructure is inadequate (a haunt of most developing countries, if not most of the countries around the world), and its unemployment rate rests at more than 10%, one of Latin America’s highest.
But it’s being touted as better than Brazil. Graft, corruption, and poor governance are said to be common among the Brazilian business community. “It makes it difficult to get anything done,” one Latin American entrepreneur with a now-forgone Brazilian business told me. He is betting on another business he has in Colombia. “The people are nice, you can get things done and it’s relatively underdeveloped,” he says.
Sitting where it does at the tip of South America, Colombia is well-positioned to serve trade in the region. That geography, after all, is what made it the epicenter of the drug trade. Swap in free trade and marketable goods and services, and Colombia will certainly be the place to be.
That is why organizations such as Fundación Social are so important. Picked as a Schwab Social Entrepreneur in 2007, the organization works to better the livelihoods of low-income households by making investments aimed at removing the structural causes of poverty in Colombia.
Other fund and micro-lenders also operate throughout Colombia, providing ample opportunities for impact investors to put capital to work, but Fundación Social has a rich history that has done good for more than a century.
Its work stems from José María Campoamor, a Jesuit priest who arrived in Colombia from Spain in the early 1900s. Campoamor mobilized thousands of poor workers to set aside small amounts of money in savings banks, agreeing to contribute the interest generated to education, nutrition, housing and other basic needs underpinning personal and collective progress. The “savings banks” and “workers’ circles” that he set up later evolved into the Fundación Social.
A better history to focus on, for sure, than Colombia’s association with drugs and prostitutes.