Colombia: Urban Past, Rural Future?

A coffee-bean picker at a plantation in Colombia.
Luis Acosta | AFP | Getty Images
A coffee-bean picker at a plantation in Colombia.

Since the 1960s, Colombia has experienced a massive migration to its cities that has transformed what was a mostly agrarian society into one of the most urbanized nations in Latin America. Bogotá, Medellín, Cali and Barranquilla have seen increased economic activity, access to better education and health-care systems, and accelerated technological development.

Though urban areas are poised to remain Colombia's primary growth generator, the country finds itself on the cusp of a rural revival. Recent political negotiations offer the chance to end a half-century of violence and to redistribute farmland among those displaced by the upheaval—a historic development that could drastically reshape the economy and make Colombia a global player.

Urbanization began nearly 50 years ago as a consequence of unrest after the newly formed National Front consolidated the Conservatives and the Liberals. With unchecked power, the government instituted draconian policies such as Accelerated Economic Development, which forcibly removed hundreds of thousands of people from their family farms in favor of expanding industrial agribusiness.

Various insurgencies arose across the country, sparking guerrilla wars and funding their activities through the narcotics trade. Caught between confiscated land, rampant violence and drug trafficking, many rural Colombians became desperate for security and opportunities for work.

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The exodus to the cities from the countryside accelerated as Colombia transitioned to a primarily export-based economy and established urban jobs, particularly in the extraction and processing industries. In the 1970s, coffee production and exports doubled. By the 1980s, more emphasis was placed on oil, which provided more jobs and ultimately led to a tripling of oil exports. This surge gave rise to private companies, which helped diversify the economy and increase domestic consumption.

The growth spurred a vast number of rural inhabitants to flock to the cities. By the 2000s, Colombia's urbanization rates were among the fastest in Latin America, with the population of cities rising to 75 percent from 72 percent of the total. From 2000 to 2011, the nation posted 4 percent annualized growth in gross domestic product, with Bogotá alone contributing 25 percent of GDP.

Cities offered people not only economic opportunity but also a significantly improved quality of life. City dwellers were spared the frequent kidnappings and other violence that were part of the drug cartel battles in the countryside. They had better access to technology, communication and transportation, as well as to vastly superior health-care and education systems.

During this intense growth, however, social divides developed within the cities themselves and between rural and urban areas. Urban centers grew so rapidly (and in a largely unorganized way) that many residents were forced to live in makeshift settlements, with nearly one-third of the population in poverty. In Medellin, close to two-thirds of the population live in slums.

Local governments have begun tackling these issues by creating agencies that will acquire cheap land to build affordable housing, schools and clinics. But the vast and embattled countryside has been largely neglected.

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As a consequence, rural economic data has been disappointing. Agriculture grew at just 2.8 percent annually in the 2000s, much more slowly than the rest of Colombia's economy. This lag has been exacerbated by a lack of productivity, underutilized farmland and limited transportation infrastructure.

Luckily, there is reason to hope that Colombia's poor performance will turn around. The government has committed to invest $100 billion in infrastructure by 2021, which will finance adding 2,000 kilometers to the nation's road network. More connectivity between the regions will help transport goods and workers more expediently and stimulate rural economies.

The government and rebels have re-engaged in peace talks that could end a 50-year period of violence and political stalemate. Such an agreement would let the displaced return to their original homes, fostering new urban centers, as well as more efficient land use and extraction. It would also ease the strained infrastructure of its bloated cities, freeing municipal funds to invest in high-return areas such as education and the creation of skilled jobs.

Colombia's rural revival truly has the capacity to positively stimulate its conflict-ridden economy.

—By Bruno del Ama

Bruno del Ama is the CEO of Global X Funds, a New York-based provider of exchange-traded funds that offer access to investment opportunities across the global markets, including the Global X FTSE Colombia 20 ETF.