Colombia: On the fast track to eradicate poverty

“What matters in life is not what happens to you but what you remember and how you remember it.” 

Gabriel García Márquez

We forecast that by the end of 2022, less than 3% of Colombia’s total population will be living in extreme poverty (less than $1.90 per day in 2011 PPP) thus fulfilling the United Nations’ Sustainable Development Goal 1: No poverty. This is even quicker than our last forecast from autumn 2018, when we forecasted that Colombia would achieve SDG 1 by the end of 2024. The main difference is due to increased GDP growth forecasts as calculated by the International Monetary Fund.

In September 2014, the World Bank wrote in an assessment of Colombia that the country faced three fundamental development objectives for attaining higher levels of well-being for all Colombians: achieving sustainable peace, sharing prosperity, and above all eradicating poverty. We argue that the latter objective is going to be fulfilled soon. Whereas the share of extremely poor in the country stood at 9.9% in 2010, we forecast that it will fall as low as to 1.7% in 2030, representing a total decrease of 8.2 percentage points within 20 years.

More than fifty years of violence have affected at least three generations of Colombians at the national, subnational, community, and individual levels. According to the World Bank, between 4.7 million and 5.7 million people were internally displaced between 1985 and 2012. In the same period, an estimated 220,000 people were killed, 27,000 kidnapped, and 25,000 disappeared. The World Bank argues that without the armed conflict, the country’s annual growth rate would be 1.5 percentage points higher and that the poverty rate in 2014 would have been half of what it was, bringing it close to the World Bank threshold of 3%, beneath which extreme poverty is considered to be “eradicated”. Although some armed violence still occurs, the Government has made strenuous efforts to reduce violence and increase state presence. Because of these efforts, Colombia is no longer considered “high risk” for investment. It continues to maintain a solid macroeconomic framework that builds more resilience against external shocks. One main driver for this is the diversification of the economy, both of investment and production, into non-oil sectors. This model provides a contrasting but positive example for oil-dependent neighbor Venezuela.

Despite these improvements, the World Bank also argues that income inequality and vulnerability to poverty remain high. These struggles are especially visible within interregional and inter-ethnic conflict, as well as in terms of gender equality. According to the Colombian think tank CEPEI, there is an average gap of “2.3 minimum wages” between women and men (Unidos por las ODS). Although women and men in Colombia in general have about the same spending power, our data reveals that especially among the lower income segment (less than $11 in daily spending power) the share of women is significantly higher than in the higher, more evenly shared, income segments. In July 2019, 51.9% of the poor were women. By 2030, this figure is likely to increase to 52.3%.

The big picture

Though the general trend for almost all South American countries points to successfully achieving SDG 1, the continent as a whole might fail. This is due to the particularly poor performance of Colombia’s crisis-stricken neighbor Venezuela. The Bolivarian Republic is running counter to the general trend on the continent and its share of extremely poor in all of South America is expected to increase to two-thirds by 2030, pushing the overall continent’s poverty rate to 5.3% of total population.

As can be seen in the graph above, Colombia’s neighbor to the south, Ecuador, was already considered to have successfully eradicated extreme poverty by the end of 2013, but in 2015, its share of poverty rose above the international threshold of 3%. However, like Brazil, this proved to be a small hiccup. Since then, poverty is expected to be below the 3% threshold until 2030. Peru already dropped below the 3% threshold in March 2016.

Another South American neighbor, Guyana, will eradicate extreme poverty by the end of 2021, decreasing its share of extremely poor from 8.8% in 2010 to 1.23% by 2030. This is due to oil production set to begin in 2020.

Apart from Venezuela and Suriname, who is also not expected to achieve SDG 1 by 2030, Brazil and Bolivia will be the last countries in South America to get under the 3% poverty threshold by this target date. Brazil is estimated to achieve SDG 1 by the end of 2028, slightly slower than we previously predicted in our last assessment in 2018. Bolivia is expected to achieve SDG 1 a year later by the end 2029, 6 years ahead of our original forecast around a year ago. This is due to higher forecasted growth rates of the country’s GDP.