draining development.pdf - Khazar University

160 Draining Development?most of it was the result of the implementation of entrepreneurial strategiesunder the Andean Pact framework. Starting in the early 1990s,Colombian enterprises began to invest abroad (see figure 5.1). Suchinvestments between 1992 and 2002 were directed mainly to Panama,Peru, the United States, and República Bolivariana de Venezuela. Themost important investments in the first two countries—the largestinvestment recipients—were in the financial sector. In 1997, the peakyear, they grew dramatically. The financial sector was a good venue forpeople to buy certificates of deposit and other financial instrumentsabroad. The investments had a substantial component of capital flightgenerated by growing political instability. Indeed, the figures for 1997 areextraordinarily high, reaching US$687.4 million (see figure 5.1, particularlythe data at the bottom).The growth of outward FDI in the financial sector did not coincide withlarge investments by Colombian banks. During these years, the lion’s shareof financial investments was in other financial services that included a varietyof contracts and activities in which individual investors could partici-Figure 5.1. Colombia: Outward Foreign Direct Investment, 1994–20107,0006,0005,000US$, millions4,0003,0002,0001,0000–1,000OFDI totalOFDI financial-related services1994 1996 1998 2000 2002 2004 2006 2008 20101994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010OFDI TOTAL 149.0 256.2 327.9 809.4 796.0 115.5 325.3 16.1 856.8 937.7 142.4 4,661.9 1,098.3 912.8 2,254.0 3.088.1 6,528.7OFDI financialrelatedservices 54.7 141.4 273.5 687.4 292.6 1.5 225.3 –227.4 75.2 32.5 32.1 32.9 184.6 745.9 346.4 204.0 139.1Source: Central Bank of Colombia.Note: OFDI = outward foreign direct investment.