IRP 400 - Gomez Senior Capstone - Final Draft

Colombia’s roadmap to economic growth: PLAN PATRIOTA AND ITS

EFFECT ON FOREIGN DIRECT INVESTMENT

Jorge Eduardo Gomez

B.A. International Relations - Syracuse University

May 3rd 2016

Abstract

The Colombian armed conflict has played a central element within the country’s recent

history and as a result has been the driving factor in Colombia’s political and social turmoil at

the start of the 21st century. However, with the implementation of military policies the country

was able to gain political and economic stability during the mid 2000’s. This paper aims to

address the military policies implemented on behalf of the Colombian government after the year

2004 and the impacts said policies may have had on the levels of foreign direct investment (FDI)

inflows into Colombia over the time period of 1998-2010. Thus the results of this study showed

a sharp increase in FDI after 2004 as shown by the FDI time series with a total of FDI inflows of

$2.5 USD billion in 2002 before Plan Patriota was implemented and a substantial increase to $10

USD billion by the year of 2010, an increase in FDI levels by source countries, a comparison of

FDI by industry while focusing on years prior to the implementation of Plan Patriota and those

after, in which FDI increased significantly from $123 USD million in 2000 to $2.1 USD billion

in 2006-2009. In addition, it will address various mechanisms that may influence FDI levels such

as, crime and kid napping rates, infrastructure safety, as well as tourism levels prior and after the

year the military policy was implemented.

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I. Introduction:

Since the mid 1960’s Colombia has been involved in an ongoing civil war that has

devastated the country in numerous ways by taking the lives of an estimated 220,000 people and

has displaced another estimated 6.5 million Colombian civilians (UNHCR 2014). In contrast to

these disturbing facts the country has also experienced increased foreign direct investment (FDI)

that has subsequently led to increased economic growth over the last decade and a half.

Moreover, before delving into the reasons behind these increased levels of FDI inflow,

one must first focus on why FDI is important to a country’s economy as well as outline the

specific government policies that may have influenced this increase in FDI inflows. Some

scholars believe that FDI is a crucial part of a country’s economy as it provides a source of

external funding and can have a significant impact on a country’s balance of payments, overall

productivity, and most importantly a country’s long-term economic performance and growth

(Garavito, Iregui, Ramirez 2014). Furthermore, FDI also allows for the transfer of technology,

capital, and technical know-how across international markets and can play an active role in

improving the local labor force’s quality and competitiveness (Garavito, Iregui, Ramirez 2014).

In order to better understand the aim of this paper, it is equally important to comprehend

the central aspect of this article, the military action policy “Plan Patriota” which was

implemented under Alvaro Uribe’s government in 2004. The implementation of the policy can

be seen as a product of asymmetric warfare (Rochlin 2011). Asymmetric warfare can be

explained as the distinctions based upon the military organization of belligerents, the notion of

state vs. non-state belligerents and also focuses on the differences between the types of

contestants, in this case the Colombian military forces, the leftwing guerrilla in the form of the

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Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN) as

well as the rightwing paramilitary group known as the United Self-Defense Forces of Colombia

(AUC) (Rochlin 2011). However asymmetric warfare does not necessarily comment on the

different power structures or power relations that occur during civil conflict.

As a result of this asymmetric warfare, the United States congress approved an aid

package worth roughly over $5 billion in 2000 labeled as Plan Colombia with the aim of

providing military assistance to the Colombian government with the ultimate goal of restoring

peace to a conflict affected nation as well as wiping out the Colombian illicit drug trade into the

United States (Rochlin 2011). This plan was further intensified with the arrival of rightwing

President Alvaro Uribe into office in August of 2002. Just a year after his inauguration, the Uribe

administration drafted a new policy labeled Plan Patriota that aimed to deploy roughly 17,000

Colombian military troops in order to debilitate the FARC (Rochlin 2011). The policy was

structured into three main phases. The first phase took place from June to December of 2003 and

focused predominantly on the country’s capital, Bogotá, with the aim of securing the nation’s

key economic and political center as well as its surrounding mountainous regions (Rochlin

2011). The second phase, carried out from February 2004 and lasting on through 2006 proved to

be more difficult as it focused on attacking the FARC’s stronghold within the Caqueta, Meta,

Guaviare and Arauca regions of the country and regaining state presence within the

aforementioned territories (Rochlin 2011). The third and final phase was to be carried out in late

2005 but was delayed due to the FARC’s resourceful military resilience. Instead, the last

segment of the policy was restructured at the end of 2006 and aimed to exterminate the FARC as

well as increase state and military presence throughout the country’s rural but strategic areas in

terms of infrastructure and resource extractive industries (Rochlin 2011). Thus, this paper

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estimates that the implementation of the military action plan “Plan Patriota” caused an increase

in national security, which as a result created a more favorable environment to invest in, thus

increasing the levels of FDI into Colombia during the years after the policy was implemented. In

order to address this assumption, a set of both descriptive and analytical research questions have

been drafted to facilitate the tackling of this issue.

Descriptive Questions:

1. What are the net inflows of FDI into Colombia during the time period studied?

2. Which sectors receive the highest percentage of FDI?

3. What are the general trends in tourism to Colombia during the time period studied?

Inferential Questions:

1. To what extent were the changes in net inflows of FDI into Colombia influenced by the

policies implemented during Plan Patriota?

2. To what extent does each sector in the economy depend on policies implemented during

Plan Patriota to increase FDI levels?

3. What is the relationship between the tourism industry and Plan Patriota and its effect on

FDI levels?

II. Literature Review:

Overall, the existing literature on the relationship between civil conflict and foreign

investment seems to be quite limited in the specific case of Colombia. However, a study carried

out in 2014 by Garavito, Iregui and Ramirez aimed to focus on the determinants of FDI within

firms operating in Colombia provides insight into the general trends of FDI into Colombia and

what type of firms are most likely to receive FDI. Though this study does not directly deal with

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the Colombian armed conflict, it is important to note that understanding the specific

characteristics of firms receiving FDI can help further understand the relationship between FDI

and the potential impact Plan Patriota may have had on the country’s business environment.

Moreover, the study examined a database consisting of 5,364 firms divided up into 28%

from the country’s manufacturing sector, 26% from trade, and 19% of the firms belonging to the

financial services sector of the economy (Garavito, Iregui, Ramirez 2014). Additionally, it is

important to note that out of all of the firms included in the study, roughly 30% of them actually

receive FDI. Firms operating in resource extractive industries, such as the petroleum exporting

and the mining industries, receive the highest percentage of FDI, with 96% and 41% respectively

(Garavito, Iregui, Ramirez 2014). On the other hand, firms operating in construction, agriculture,

and trade industries, receive the lowest percentage of FDI, with 16%, 25%, and 26% respectively

(Garavito, Iregui, Ramirez 2014).

Furthermore, the study also examined whether the size of a firm was a determinant for

the amount of FDI it received. According to the study, it is clear that size plays a significant role

in the determination of whether a firm receives FDI or not, as roughly 77% of the firms receiving

FDI were classified as large (Garavito, Iregui, Ramirez 2014). The importance of the firm’s size

is further exemplified as the percentage of medium and small sized firms receiving FDI

plummets to 14% and 9% respectively (Garavito, Iregui, Ramirez 2014). Another key element

that determines whether firms receive FDI was the fact that an estimated 78% of all firms

receiving FDI had already conducted some form of foreign trade activity (Garavito, Iregui,

Ramirez 2014). This means that foreign investors generally prefer to acquire or invest in “large

and well-established firms that allow them to participate in a relevant market share and already

have well-established trade channels” (Garavito, Iregui, Ramirez 2014). Having examined the

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determinants of what causes firms to receive FDI lays the groundwork for further data analysis

as this paper aims to assess whether the increased levels of FDI inflows were at all influenced by

the implementation of the military action policy Plan Patriota.

In addition to the determinants of FDI at the firm level, another study conducted by

Camacho and Rodriguez aims to explain the relationship between a firm’s exit from the market

and armed conflict. Again, though this study does not address the notion of military action

policies having an impact on the levels of FDI inflows, it examines whether or not a firm is more

likely to exit the market due to an increase in violence or civil conflict. Thus it is informative in

the sense that it provides the foundation for establishing the idea that civil conflict has a

detrimental impact on a country’s business environment. The study conducted by Camacho and

Rodriguez used three different methods in order to establish the relationship between a firm’s

decision to exit the market and armed conflict.

Firstly, the study used a panel-fixed-effect estimation at the firm level, in which the

contemporaneous armed conflict served as the independent variable (Camacho, Rodriguez 2012).

In order to control for endogeneity, the second approach used a lagged armed conflict measure

instead of the contemporaneous one (Camacho, Rodriguez 2012). Finally, the third and proven to

be most reliable approach, adopted an instrumental variable approach, where “contemporaneous

armed conflict with lagged government deterrence” (Camacho, Rodriguez 2012) were used in

order to determine the likelihood of a firm exiting the market due to increased armed conflict.

The study found that an average increase in violence also increases the probability of a firm

exiting the market by 5.06 percentage points (Camacho, Rodriguez 2012). It is important to note

that this likelihood of a firm exiting the market varies, in which smaller firms with less workers

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and capital are more vulnerable to an increase in violence and thus will likely exit the market

when armed conflict increases (Camacho, Rodriguez 2012).

In contrast to some scholars, Maher’s study argues that FDI inflows into areas of

economic interest may in fact increase during times of increased civil conflict. The study

specifically focuses on FDI levels related to Colombia’s oil industry and the fact that levels of

FDI to the oil exporting sector of the economy have increased, even during times of increased

armed conflict as in the early 2000’s. For example, Colombia’s FDI stock in 2000 amounted to

roughly $11.2 billion, in comparison to a staggering $95.7 billion in 2011 (Maher 2015). It is

important to note that the years 0f 2004-2007 represented the greatest increase in both FDI as

well as GDP per capita growth, where the latter averaged roughly 4.3% annually (Maher 2015).

According to the study, the stark increase in FDI to oil exporting industries can be

explained through two narratives. The first deals with the fact that the oil, along with other

resource extractive industries requires large amounts of foreign capital, technical knowledge as

well as technology, thus meaning that the industry is highly reliant on FDI (Maher 2015). The

second narrative addresses the role of the Colombian state and argues that the increase in FDI to

the oil industry has been a product of the measures taken on behalf of the Colombian government

in order to create a more attractive investment environment for foreign oil companies (Maher

2015). For example, the study explains the fact that among other neo-liberal policies, the

Colombian government’s decision to allow foreign oil firms to own 100% of the stakes in oil

ventures; permit a lower and sliding-scale royalty rate on oil projects, as well as offer foreign oil

firms longer exploration licenses to develop oil projects, has created a more favorable investment

climate (Maher 2015). Moreover, the study also argues that the Colombian government’s

decision to partially privatize the country’s state oil company “Ecopetrol” also played a role in

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attracting foreign investors, as it allowed the company to receive FDI from various major

international oil corporations (Maher 2015).

III. Theoretical Framework:

There is a great deal of literature that has been written about the ramifications that civil

conflict can have on a country’s economy. Specifically, in the case of Colombia though this

literature seems to fail to address the notion of the country’s period of stark economic growth

following the year of 2004, since most theoretical framework suggests that a country’s economic

growth is subsequently hindered during time in which the country is engaged in civil conflict.

In order to put things into perspective this paper will focus on the notion of “development

in reverse” (Maher 2015), which analyzes existing literature that argues the fact that a country

engaging in intrastate conflict will consequently reduce the country’s economic performance. For

example, one study argues that GDP per capita will be reduced by 30% if a country is engaged in

a civil conflict for a period of 15 years (Collier, 199: 175). Due to the fact that there is no

existing literature that analyzes the idea that a country can receive greater inflows of FDI during

times of increased civil conflict, this paper will address the concept of Development in Reverse

by further analyzing Collier’s theory of factors that affect an economy when a country is

engaged in civil war.

Firstly, the theory states that when a country is engaged in a civil conflict, resource

destruction poses the most imminent threat to a downfall in economic growth (Collier 1999). In

the case of Colombia, this is exemplified through attacks on oil pipelines or manufacturing

plants. Secondly, the theory explains the idea that along with civil conflict, comes some sort of

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social disruption or disorder that further inhibits economic growth and FDI (Collier 1999). In

regards to the Colombian civil conflict, there are various factors that can be attributed to causing

social disruption. One of the main issues leading to social disorder as a result of the Colombian

armed conflict has been the fact that infrastructure safety has decreased, calling for greater

government intervention in order to keep roads and railways safe. As a result, this also leads to

the inability of the state in building new infrastructure in conflicted affected areas. Furthermore,

kidnapping and crime rates also manage to inflict social disorder and further decrease economic

performance and specifically FDI.

Thirdly, the theory examines the idea that in times of civil war, public expenditure will be

diverted in order to attend to conflict related necessities and thus the state will be unable to invest

into other sectors important to a country’s development such as healthcare or education programs

(Collier, 1999). Lastly, the theory examines how the private sector of the economy will react in

times of civil conflict. According to the theory presented by Collier, the private sector of the

economy will engage in portfolio substitution meaning that their assets will be shifted away from

industries heavily affected by the armed conflict and in some instance, investors may even

choose to withdraw their assets from the country and invest elsewhere Collier, 1999).

IV. Methodology:

In reference to the theoretical framework as well as the regional context presented, this

paper will focus on the relationship of the independent policy in the form of Alvaro Uribe’s

military action policy, Plan Patriota, that was implemented in 2004 and its impact on the levels

of FDI within Colombia. The implementation of the policy heavily influenced the country’s level

of national security in the years after 2004. Thus it is interesting to analyze the effects the

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military action plan may have had on the levels of FDI within Colombia, whether the net inflows

of FDI into Colombia were influenced by the implementation of Plan Patriota, and if so, whether

these levels varied by industry or remained the same along various sectors of the Colombian

economy. In order to further examine the effect that Plan Patriota may have had on FDI inflow

levels in Colombia, this paper will measure the policy’s impact in various ways.

Firstly, a time series of net FDI inflows to Colombia during the time period studied

(1998-2010) will give a general understanding of FDI trends within the country and provide the

necessary foundation to observe whether or not Plan Patriota had any influence at all on the

levels of FDI inflows to Colombia. Additionally, to provide an even clearer picture, this paper

will evaluate the levels of FDI into Colombia by source country. This allows one to further

analyze whether the increases in FDI are a product of regional agreements or whether the

increase in national security as a result of the implementation of Plan Patriota actually improved

investor confidence when making the decision whether or not to invest in Colombia. However,

due to Latin America’s ongoing extractive boom, in which the continent’s natural resources have

gained international prominence and the region has become an attractive destination for foreign

investment, analyzing the various industries receiving FDI in Colombia will solidify whether the

increase in FDI was simply a product of the region’s overall boom in extractive industries, or

whether Plan Patriota played a key role in establishing an environment that restored confidence

in foreign investors.

Moreover, the theoretical framework presented established the notion that there are

various mechanisms that can play a role in a country’s economic downturn while engaged in

civil conflict. In order to address these issues from the scope of development in reverse, this

paper will also analyze various internal factors that may have been influenced by the

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implementation of Plan Patriota and may have influenced the increased levels of FDI into

Colombia. To begin with, the idea of resource destruction goes hand in hand with crime levels

within Colombia as resources are being destroyed as a result of armed attacks on oil pipelines as

well as manufacturing plants (Maher, 2015). Thus, this paper will analyze crime data from 1998-

2010, as well as focus on industry specific crime such as attacks on oil pipelines.

Based on the theoretical framework, social disruption has been a driving force in

hindering economic performance within a civil conflict affected region. In the case of Colombia,

this paper will attempt to analyze how Plan Patriota played a role in influencing some of the key

forces that led to social disruption within Colombian society, such as kidnapping rates as well as

infrastructure construction and development. Lastly, given that FDI is highly reliant on

international opinion and foreign investor confidence, this paper will analyze tourism flows

within Colombia from 1998-2010. Tourism being a highly susceptible industry to civil conflict,

as tourists are the first to leave a country when civil conflict or violence erupts, it is also a good

determinant to measure whether Plan Patriota’s impact on national security also had a larger

impact throughout further sectors of the Colombian economy such as the tourist industry.

V. Data Analysis:

FDI Time Series 1998-2010

Contrary to what some scholars believe in terms of civil conflict leading to economic

downturn and thus a decrease in economic growth as well as FDI, Colombia experienced a stark

increase in FDI during the time referred to by others as the peak in intensified armed conflict

within the country’s ongoing civil war. As shown in Figure 1, the time series showing net

inflows of FDI into Colombia, the country’s levels of FDI inflows were slightly below $2.5 USD

billion in the year of 2002 when Alvaro Uribe’s government was inaugurated in August of that

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year. The most important increase in FDI inflow levels is depicted after the year of 2004, in

which the country’s saw its incoming levels of FDI quadruple from slightly below $2.5 USD

billion to a staggering estimate of over $10 USD billion. Although this impressive increase may

be a result of various factors, it is important to note that Plan Patriota was implemented in 2004

and caused a significant shift in national security, and so provided a safer investment climate for

foreign investors. Through the implementation of Plan Patriota, the Colombian government

managed to regain control of strategic regions within the country and crucial to resource

extractive industries such as the Caqueta, Meta, Guaviare and Arauca regions (Rochlin 2011).

FDI by Source

In order to further solidify the narrative that the implementation of Plan Patriota had an

influence on the levels of Colombian FDI inflows, it is important to analyze the source countries

of Colombia’s FDI. As shown in Figure 2, the levels of FDI inflows into Colombia generally

increase following 2004 throughout most countries. It is important to highlight the fact that the

dominant sources of FDI are derived from predominantly European countries, the United States

(US), as well as Mexico. In the case of the US, FDI levels more than doubled in the years 2004-

2006 from an estimated $1.2 USD billion in 2004 to around $2.6 USD billion in 2006. However,

it is important to take into account that the implementation of Plan Patriota was largely funded

by the US as part of the broader US war on drugs Plan Colombia and thus the stark increase in

FDI is not seen as surprising due to US involvement in Colombia.

Moreover, the largest increase in investment in comparison to years before Plan Patriota

was implemented is seen by the fifteen-time increase in FDI coming from the United Kingdom

(UK) as FDI from the UK equaled roughly $278 USD million in 2004 and an astounding $4.3

USD billion just one year after Plan Patriota was implemented in 2005. The fact that such a large

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increase in FDI came from a country that is not directly linked to any military policies within

Colombia can be interpreted as a product of the country’s increase in national security and thus

an increase in investors’ perception of the improved stability and investment climate within

Colombia. Though not as large of an increase as with the UK, other European countries also saw

a growth in FDI following the year of 2004. Most notably are the cases of the Netherlands and

Spain, with an increase from just $90.1 USD million in 2004 to $488.6 USD million in 2005 and

$277.5 USD million in 2004 to $715.6 USD million in 2005 respectively.

Lastly, Mexico’s change in FDI following merely a year after the implementation of Plan

Patriota is also interesting to analyze. In 2004, Mexico’s FDI into Colombia yielded $-10.4

million meaning that Mexico’s FDI into Colombia actually suffered a $10.4 USD million loss in

comparison to 2003. In comparison, just on year after the implementation of Plan Patriota, in

2005, Mexico’s FDI into Colombia yielded roughly $1 USD billion. This could imply that the

success of Plan Patriota on a military and national security basis could have also caused for

Mexican investors to feel more confident about continuing to invest in Colombia.

FDI by Industry

To further give credibility to the notion that Plan Patriota had an influence on Colombia’s

investment climate and thus helped increase levels of FDI inflows, it is imperative to analyze the

levels of FDI according to the various industries that receive FDI. The first interesting point to

note in Figure 3 is the fact that out of 5,364 firms studied, only about 30% of firms actually

receive FDI. Additionally, within the manufacturing sector, which accounts for roughly 15% of

Colombia’s total GDP (Camacho, Rodriguez 2012), roughly 34% of all firms receive FDI

(Figure 3). Given that this sector of the economy is of significant importance to the economy at

the macro level, the fact that slightly over a third of all manufacturing firms receive FDI is

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slightly low yet understandable given the region’s dependence on extractive industries to

stimulate economic performance.

Furthermore, it is no surprise that the two industries with the largest percentage of FDI

are both resource extractive industries such as the mining and oil exporting industries. The oil

industry being highly reliant on foreign capital and technology in order to flourish explains the

fact that an overwhelming 95% of firms operating within the oil industry receive FDI (Figure 3).

Additionally, it is important to note that while the data presented in Figure 3 is helpful in order to

understand the how FDI inflows into Colombia vary among different industries, it would have

been even more insightful if the data had been available by year. Due to the fact that the the same

data proved to be unavailable on a yearly basis, it is problematic to assess the true impact the

Plan Patriota had on an industry level, given that FDI can be caused due to a variety of factors

and with the data available, it is difficult to claim whether or not Plan Patriota influenced the

percentages of FDI by industry following the implementation of the policy in 2004.

Additionally, in order to sustain the argument that the implementation of Plan Patriota

was a major driving force behind Colombia’s increase in FDI inflows following the years after

the policy was implemented, Figure 4 shows a comparison of FDI inflows by industry,

comparing the years of 2000 and the time series of 2000-2005 and 2006-2009. As displayed in

Figure 4, it is clearly visible that FDI, even in industries that are heavily reliant on foreign aid,

such as mining or petroleum, was significantly lower in 2000 compared to the years of 2006-

2009. According to Figure 4, FDI inflows in the primary sector of the economy in 2000

amounted to just $123 USD million, while during the time period of 2006-2009, FDI inflows in

the same sector increased significantly to $2.1 USD billion. Thus one could further argue that the

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implementation of Plan Patriota in 2004 was the driving factor behind Colombia’s increase in

national security, which in turn established a more stable and safer investment climate.

Mechanisms

As mentioned earlier, given that an increase in FDI can be caused by numerous factors,

this paper will attempt to minimize the argument that Plan Patriota in fact did not significantly

influence the levels of FDI inflows into Colombia. In order to do so, this paper will reference

back to the theoretical framework discussed and focus on four key elements that are crucial to

the investment climate and related to the notion of social disorder.

Crime Rate

One of the major driving forces of social disruption can be attributed to crime rates

within a given country. In the case of Colombia, it is most effective to focus on two types of

crime: homicide and robbery rates. The decision to focus on these two different types of crimes

can be explained as homicides being a significant threat to foreign investors and thus interesting

to evaluate whether homicide rates declined after the implementation of Plan Patriota. On the

other hand, robberies, while not as violent or devastating as homicides, also pose a significant

threat to foreign investors. Unfortunately, the data for both homicide and robbery rates proved to

be incomplete and data for certain years could not be obtained.

Although this poses a challenge in the ability to fully analyze the impact of Plan Patriota

on crime rates, the data available still manages to give a general insight into how crime rates

decreased after 2004 (Figures 5 & 6). For example, Figure 4, which measures the homicide rate

per 100,000 inhabitants was at a record high in 2002 with an estimated 62 homicides per 100,000

people. In contrast, this figure dropped to slightly below 40 in 2005, just one year after the

implementation of Plan Patriota. The impact that Plan Patriota had on the robbery rate will

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prove to be difficult to analyze in its entirety, given the fact that the relevant data was only

available for years 2004-2010. Thus it is difficult to estimate how high the robbery rate was prior

to the year Plan Patriota was implemented, yet Figure 6 still shows the number of robberies

plummet from 129 in 2004 to roughly 88 just one year after the implementation of the military

policy in 2005. Given that Figure 6 also shows the robbery rate fluctuate, as it increases again in

2006 nearly to the level of 2004, this can perhaps be explained by the fact that crime will always

be present and robberies will continue to occur, especially in densely populated urban areas such

as Bogotá.

Kidnapping Rate

Another key factor that contributes to social disruption is infamous concept of kidnapping

as carried out by the various belligerents of the Colombian armed conflict: the leftwing guerrillas

in the form of the FARC and ELN as well as by rightwing paramilitary groups such as the AUC.

Figure 6 exemplifies the effectiveness of Plan Patriota in decreasing the kidnapping rate within

Colombia. Kidnapping rates reached an all-time high within Colombia in the year 2000 as the

number of kidnapping victims amounted to 3,547 (Figure 7). In comparison, in 2005, just one

year after the implementation of Plan Patriota, the number of kidnapping victims fell by almost

three-times as much to 1,283 (Figure 7). In 2009, the kidnapping rate was at an all-time low as

the number of kidnapping victims fell to 1,252, further demonstrating the effectiveness of Plan

Patriota in decreasing Colombia’s kidnapping rate. As a result, the decrease in kidnapping

victims following the implementation of Plan Patriota can be seen as another factor that helped

increase the levels of Colombian national security and thus imply that Plan Patriota helped create

a more favorable investment climate within the country.

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Infrastructure

Lastly, infrastructure safety accounts for another aspect that could lead to some sort of

social disruption. Though data on the number of attacks committed on Colombian roads was

unavailable, this paper will primarily focus on the Colombian railway as a good indicator for

infrastructure safety. Figure 8, showing the Colombian railroad line in kilometers proves to be

incomplete as data was only available in the years 2005, 2006, 2008, and 2009. However, and

more importantly, the data showing the amount of metric tons times kilometers as displayed in

Figure 9 provides great insight into how the number of goods transported on Colombian railways

has increased steadily after the year Plan Patriota was implemented. Moreover, infrastructure

attacks declined tremendously from around 800 in 2002 to ‘merely’ 76 in 2009 (Bloomberg

2011). This implies that the efforts on behalf of the Colombian government through the

implementation of Plan Patriota have helped bolster the country’s investment climate by

tightening up issues of national security and infrastructure safety.

Tourism

One of the interesting facets about FDI is the fact that it requires international knowledge

as investors must be up to date on current events in different parts of the world. This paper will

attempt to analyze whether the impacts that Plan Patriota had on national security further

transcended into other sectors of the Colombian economy such as the tourism industry.

According to a study carried out by the world tourism organization (UNWTO) the number of

tourist arrivals to Colombia doubled from the year 2003 to 2007 at 624,909 and 1,222,102

respectively and growing at an annual rate of 18% (UNWTO 2009). Moreover, as illustrated in

Figure 10, tourist arrivals to Colombia doubled that of arrivals to South America in the year of

2004, with Colombian tourist arrivals amounting a 30% increase in comparison to South

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America’s 15%. Lastly, Figure 11 depicts the increase in international tourist receipts, and it can

be seen that the amount of money being spent by international tourists in Colombia increases

from slightly over $1 USD billion in 2002 to nearly $2.25 USD billion in 2006. Thus it can be

implied that the return of tourists to Colombia further exemplifies the improvement in national

security as a result of the implementation of Plan Patriota.

VI. Conclusions:

Taking into account the various mechanisms studied, this article estimates the effect that

the implementation of Plan Patriota may have had in influencing the levels of FDI inflows to

Colombia. Though it must be said that some may attribute this stark increase in FDI inflows to

other factors other than an increase in national security due to the implementation of Plan

Patriota. It appears to be clear that had the relevant data, such as the annual change in FDI by

industry or the exact industry that source countries were investing in been available, this would

have provided further credibility to this research study. However, it must also be mentioned that

the data obtained provides insight to the existing literature as it takes into account other aspects

that can determine the levels of FDI in relation to civil conflict such as crime and kidnapping

rates, infrastructure safety, as well as the vulnerability of the tourism industry. This study can be

seen as a first step in order to fill the gaps within the literature relating to this topic as it takes

into account areas of interest such as FDI and attempts to view the reasons behind increased

levels of FDI inflows from the perspective of government and military policy.

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Appendix

Figure 1:

Figure 2:

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Figure 3:

Figure 4:

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Figure 5:

Figure 6:

Source: The Global Economy http://www.theglobaleconomy.com/Colombia/robery/

Source: The Global Economy http://www.theglobaleconomy.com/Colombia/robery/

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Figure 7:

Figure 8:

Source: Colombian Central Bank https://www.google.com/fusiontables/data?docid=1ITdHC6xSa8se1wbuZLUi6ZYYnNETSLYOHry5ZMeh#rows:id=1

Source: The Global Economy http://www.theglobaleconomy.com/Colombia/Railroad_lines/

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Figure 9:

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Figure 10:

Source: The Global Economy http://www.theglobaleconomy.com/Colombia/Railway_transport_of_goods/

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Figure 11:

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