Foundations for Growth and Competitiveness 2026

Colombia

Colombia’s growth potential has declined from above 4% before 2010 to around 2.5% currently, a pace that does not allow for substantial closing of the gap in GDP per capita vis-à-vis the most advanced economies. The growth slowdown reflects a prolonged productivity stagnation and a sharp drop of the investment rate. Labour utilisation remains subdued, with the labour force participation of women particularly low. Reviving investment, boosting innovation and skills, and bringing more women into the labour force are needed to restore income convergence with more advanced economies.

Strengthening access to quality education especially at the foundational stage would improve skills and raise female labour force participation. Enhancing regulatory quality and promoting competition, especially in upstream sectors such as electricity, would improve the business environment. A better designed R&D policy framework would incentivise firm-level innovation and productivity growth. High tariffs and burdensome customs procedures restrict trade integration and productivity.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Human capital: Enhance access to high quality education from early years

Access to education in Colombia has improved over the last decade, but education outcomes remain poor and are strongly influenced by socio-economic backgrounds, holding back productivity growth and access to formal jobs. Enrolment, equitable access, and quality of early childhood education are relatively low, leading to poor skill development and low female participation rates.

Recommendations

✓ Invest into raising staff-to-child ratios in early childhood education to improve quality.

✓ Improve education quality at all levels of education through continuous teacher training.

✓ Provide targeted cash transfers and tutoring to students from at-risk and underrepresented groups.

Regulatory quality: Increase the use of regulatory impact assessments

The three tools to improve regulatory quality – stakeholder engagement, ex-ante regulatory impact assessments, and ex-post evaluations – are used sporadically for primary laws and then only for those initiated by the executive, dampening regulatory quality. Secondary regulations, especially those of a technical nature such as sector regulators, are more likely to undergo regulatory quality checks.

Recommendations

✓ Increase the use of regulatory impact assessments for primary legislation.

✓ Improve communication and information about upcoming and published assessments.

Innovation: Improve the design of R&D tax incentives

R&D spending is among the lowest in the OECD, at about 0.3% of GDP, resulting in poor innovation performance and stagnating productivity. R&D spending is especially low among businesses and highly dispersed, with more than 80% of firms never investing into any R&D. This leads to high concentration and large regional differences in innovation and exporting. R&D tax subsidy rates are low in international comparison and, since a reform in 2022, R&D expenses for which tax credits are claimed are no longer tax deductible as business costs, resulting in negative overall implied R&D tax subsidy rates.

Recommendations

✓ Improve incentives for R&D investments by firms by increasing R&D tax subsidy rates and reinstalling provisions to combine R&D tax credits with the baseline tax deduction.

Openness to trade: Lower tariff and non-tariff barriers

Despite strong performance in foreign direct investment, overall trade openness remains limited. Tariffs and non-tariff barriers are high and particularly restrictive in certain tariff lines. Trade faciliation faces challenges, with customs clearing times signicantly higher than in other OECD countries, in part due to onerous documentary requirements.

Recommendations

✓ Reduce tariffs, starting with the tariff lines with the highest tariffs.

✓ Improve trade facilitation by expanding the acceptance of copies instead of originals of customs documents, certifying more Authorised Economic Operators, making greater use of advance rulings, and taking a more risk-based approach to customs controls.

Energy: Improve competition in the electricity sector

Despite essentially universal access to electricity, prices for electricity in Colombia are high, with large differences across regions. Development of renewable energy sources is hampered by the capacity of the electricity grid and its limited expansion to remote regions with large renewables potential. Barriers to entry are high due to lack of separation of generation, distribution and transmission activities.

Recommendations

✓ Accelerate electricity grid investments with streamlined environmental licensing processes and early engagement and consultation with communities.

✓ Introduce vertical separation of electricity transmission from retail supply and strengthen separation between generation and transmission activities.

Recent progress on structural reforms

Colombia has implemented several structural reforms in the recent past. Tax reforms in 2021 and 2022 have increased fiscal revenues, but spending pressures call for additional revenue-raising measures. The 2024 pension reform has reduced regressive cross-subsidies and harmonised previously competing schemes. The introduction of an ambitious multipurpose land registry has been significantly accelerated since 2023. The introduction of one-stop shops and lowering of recurring business registration fees across the country has reduced barriers to entrepreneurship and market entry. However, broader reform momentum remains constrained by political fragmentation.