Country Strategy Note: Colombia
14 June 2016
Corruption Matters
27 August 2015
NRGI Regional Knowledge Hub Alumni Story: Transforming Extractive Industries for Development in Latin America
19 October 2015

The extractive sector accounted for 69 percent of Colombia's exports in 2011. The petroleum industry is particularly important; it generated 4 percent of total government revenue in 2011 and is the focus of this assessment. However, over the last decade interest in Colombia's coal, nickel, gold, and other mineral resources has grown. Tax incentives and market reforms have created attractive conditions for foreign direct investment and a number of multinational extractive companies recently began operations in Colombia.

Colombia's Performance on the Resource Governance Index

Colombia received a "satisfactory" score of 74, ranking 9th out of 58 countries. Excellent performance on the Safeguards & Quality Controls component contrasted with a lower Enabling Environment score.

Rank
(out of 58)		   Score
(out of 100)
9 Composite Score 74
17 Institutional & Legal Setting 75
Freedom of information law 33
Comprehensive sector legislation 100
EITI participation 33
Independent licensing process 100
Environmental and social impact assessments required 100
Clarity in revenue collection 67
Comprehensive public sector balance 44
SOC financial reports required 100
Fund rules defined in law N/A
Subnational transfer rules defined in law 100
11 Reporting Practices 73
Licensing process 100
Contracts 33
Environmental and social impact assessments 100
Exploration data 100
Production volumes 100
Production value 67
Primary sources of revenue 50
Secondary sources of revenue 33
Subsidies N/A
Operating company names 100
Comprehensive SOC reports 50
SOC production data 100
SOC revenue data 38
SOC quasi fiscal activities N/A
SOC board of directors 100
Fund rules N/A
Comprehensive fund reports N/A
Subnational transfer rules 100
Comprehensive subnational transfer reports 100
Subnational reporting of transfers 0
3 Safeguards & Quality Controls 91
Checks on licensing process 89
Checks on budgetary process 89
Quality of government reports 67
Government disclosure of conflicts of interest 100
Quality of SOC reports 100
SOC reports audited 100
SOC use of international accounting standards 100
SOC disclosure of conflicts of interest 100
Quality of fund reports N/A
Fund reports audited N/A
Government follows fund rules N/A
Checks on fund spending N/A
Fund disclosure of conflicts of interest N/A
Quality of subnational transfer reports 67
Government follows subnational transfer rules 100
14 Enabling Environment 58
Corruption (TI Corruption Perceptions Index & WGI control of corruption) 50
Open Budget (IBP Index) 80
Accountability & democracy (EIU Democracy Index & WGI voice and accountability) 54
Government effectiveness (WGI) 61
Rule of law (WGI) 45
  Satisfactory   Weak
  Partial   Failing
To explore all data and compare
scores, use the RGI Data Tool.

Institutional & Legal Setting (Rank: 17th/58, Score: 75/100) learn more

While critical gaps in public access to information remain, Colombia's comprehensive legal framework and independent licensing process earned it a "satisfactory" score of 75.

The National Hydrocarbons Agency (ANH) grants extractive rights following direct negotiations or open bidding. A 2003 hydrocarbons law replaced production-sharing agreements with a concession system in which companies pay the government taxes and royalties in exchange for extractive rights. The Customs and Tax Authority collects taxes while the ANH collects non-tax revenues and regulates the oil sector. Royalties go into a special account at the Finance Ministry and do not enter the national treasury.

Environmental and, in some cases, social impact assessments are required before projects begin. The results are published, but the consultation process does not always address the concerns of affected communities. Colombian law includes several provisions designed to improve public access to information, some of them specific to the extractive sector, but there is no equivalent of a Freedom of Information Act.

Reporting Practices (Rank: 11th/58, Score: 73/100) learn more

Colombia received a "satisfactory" score of 73. The government publishes comprehensive data on production volumes, exploration, and the licensing process, but disclosure of contract terms and revenues is incomplete.

The ANH annually publishes signed contracts with oil companies. The contracts are not particularly detailed and confidentiality clauses protect technical information from public disclosure.

The Finance Ministry publishes some information on royalty policies and on dividends from Ecopetrol, the national oil company, but no other revenue figures. The Mining and Energy Ministry publishes data on reserves, investment, royalties, and production data by company. The ANH provides information on reserves, production volumes, investment, operating companies, royalties, and taxes. The Central Bank publishes the amount of resource exports and foreign direct investment, as well as historical information on production-sharing contracts.

Safeguards & Quality Controls (Rank: 3rd/58, Score: 91/100) learn more

Colombia earned a "satisfactory" score of 91, its highest on any component, due in part to extensive audit requirements and new conflict-of-interest disclosure policies.

Extractive sector laws limit the discretion of licensing officials, and their decisions may be appealed. Oil revenues are reviewed by the ANH's internal auditor and national audit agencies; their reports are published and presented to lawmakers. A legislative commission is responsible for monitoring the extractive sector, but its oversight capabilities are weak.

Enabling Environment (Rank: 14th/58, Score: 58/100) learn more

Colombia received a "partial" score of 58, reflecting fair performance on indicators of budgetary openness and poorer rankings on corruption control and the rule of law.

State-Owned Companies (Rank: 6th/45, Score: 88/100) learn more

Before the legislative reforms of 2003, all petroleum companies operating in Colombia were required to partner with Ecopetrol. A few such production-sharing contracts remain, but Ecopetrol now competes with private companies for concessions. The company remains the largest oil producer in the country, but is no longer entirely government-owned.

Since its restructuring in 2003, Ecopetrol has improved transparency standards. General financial data are available and properly audited, but information on the remaining production-sharing contracts and joint ventures is incomplete.

Natural Resource Funds learn more

In 1995 the government created a Savings and Stabilization Fund financed by royalty payments from oil-producing regions. The fund was used to pay off public debt and no longer exists.

Subnational Transfers (Rank: 10th/30, Score: 78/100) learn more

The distribution of royalties to oil-producing regions has been controversial; corruption scandals led to legislative changes in 2011. New law reduces the share of resource revenues allotted to regional and municipal governments and imposes more conditions on transfers. The rules governing transfers are published, as are quarterly reports of disbursements.

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Composite Score

74

INSTITUTIONAL & LEGAL SETTING

75

REPORTING PRACTICES

73

SAFEGUARDS & QUALITY CONTROLS

91

ENABLING ENVIRONMENT

58

To explore all data and compare country scores, use the RGI Data Tool.

Key Economic Indicators

Year 2000 2005 2011
Population (million) 39.76 43.04 46.93
GDP (constant 2011 international $ billion) 127.5 165.9 333.4
GDP per capita, PPP (constant 2005 international $) 6,619 7,305 8,860
Oil and gas revenues (% total government revenue)   3 4
Extractive exports (% total exports) 44 42 69
Sources: Oil and gas revenue as share of total government revenue from the Economist Intelligence Unit and the International Monetary Fund. All other data form the World Bank. Oil and gas revenues 2005 data from 2006.

Colombia in Detail

Full Colombia Profile PDF
     (Spanish)


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