law and the new political economy of development in...

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LawandtheNewPoliticalEconomyofDevelopmentinColombia

ChangesandContinuitiesinIndustrialPolicies

ShunkoRojas*

Contents1.Introduction.....................................................................................................................................................3

2.TheDiscourseoftheNewDevelopmentStrategy........................................................................................5

3.ExportStrategy..............................................................................................................................................13

4.ForeignDirectInvestmentStrategy.............................................................................................................19

5.CompetitivenessStrategy.............................................................................................................................31

6.ThePoliticalEconomyofDevelopment.......................................................................................................38

7.LegalImplications..........................................................................................................................................50

8.Conclusions ....................................................................................................................................................55

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Abstract

One of the characteristics of the new developmental state in Latin America has been the revival ofindustrial policies. These policies, however, do not constitute a coherent set derived from clear

recommendations enshrined in an economic model. On the contrary, the current configuration ofindustrialpoliciesrespondsonlypartiallytoanewdevelopmentconsensus.Theparticularcontentandshapeofthesepolicies,theirmeaninganddistributiveeffects,arealsodeeplyinfluencedbythepolitical

economyunderlying them, the institutional scaffolding inwhich they are inserted, and theparticularlegal instruments chosen to implement them. This chapter analyses the configuration of industrialpolicies in Colombia under the Uribe administration (2002‐2010), addressing, in particular, export

promotion, foreign direct investment and competitiveness policies. The analysis tracks the historicalevolution of thesepolicies from their origins under the Import‐Substitution Industrializationmodel inthe1960s,totheirtransformationsundertheWashingtonConsensusinthe1990s.Foreachperiod,the

study delves into the prevailing economic ideas that have provided a theoretical justification for theadoptionof industrial policies, the political economyunderlying them, and theparticular institutionaland legal shape that theyhaveadopted.The research finds that industrialpolicies inColombiaduring

the2000swerelargelyjustifiedbyappealingtocentralideasofthenewdevelopmentconsensus,albeitretaining some of the key concepts of the Washington Consensus. In terms of policy design andimplementation,whiletherehavecertainlybeensomeinnovations,industrialpoliciesrepresentedmore

continuitythanchangewithrespecttopoliciesadoptedduringthe1990s.Legalarrangements, inturn,combinedahighly formalist viewof law, stressing the roleof lawasaconstraint tostateaction,with

more informal and flexible instruments which see law as a mechanism to coordinate and facilitatecommunicationbetweenthepublicandtheprivatesectors.Finally,thestudyfindsthataselectedgroupof large local firms and conglomerates, which grew under the protections of the import‐substitution

industrialization and later took advantage of the economic liberalization, were among the mainbeneficiariesofthenewindustrialpolicies.

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1.IntroductionIn the last decade,most LatinAmerican countries have adopted important policy reforms revealing a

reorientation in their development strategies. For many, this turn constitutes a new developmentparadigmwhichexpressesanewconsensusineconomicdevelopmentthinkingandideas,differentfromboththeimport‐substitutionindustrializationmodelandtheneoliberalmodel.Inmanycountriesofthe

region, these policy shifts coincided with the emergence of left or left‐of‐center governments whichtook power deploying a critical, and in some cases radical, discourse against the “WashingtonConsensus” policies and ideas. However, the new development paradigm goes beyond the political

orientationofparticulargovernments.Indeed,thenewconsensusprovidesanewlanguage(langue)fordevelopmentpolicieswhichisbeingusedbybothprogressiveandconservativegovernmentsalike.1Thisdoesnotmean,ofcourse,thattherearenodifferencesinpoliciesandapproachesamongthedifferent

governments. Left and right wing governments tend to favor different constituencies, appeal todifferentideals,prioritizedifferentgoals.Still,regardlessoftheirpoliticalorientation,policy‐makersandscholars intervenetodayindevelopmentpolicydebatesbuildingargumentswhicharestructuredbya

sharedlanguageofthenewconsensus.

Oneofthecentralideasofthispaperisthatwhileitmaybetruethatthereisanemergingdevelopmentconsensus, current policiesarenot just themereoutcomeof them.Theparticularcontentandshapethesepoliciesadopt,theirmeaningandeffects,aredeeply influencedbythepoliticaleconomybehind

them, the institutional scaffolding in which they are inserted, and the particular legal instrumentschosentoimplementthem.Theargumentunfoldsasfollows.First,economicmodelsdonotdeterminedevelopmentoutcomes.Inotherwords,theprocessofeconomicdevelopmentisneverthemechanical

translation of an economic theory into action. The process can be understood as a series of“translations”.2Economictheoriesaretranslatedintomodelsandpolicyobjectives,policyobjectivesarein turn translated into institutional arrangements and legal instruments, and these are applied and

operate in particular contexts. In eachof these translations there are gapswhichmust beovercome;and each translation unavoidably involves a political choice among alternative options. Second, laws,

*S.J.D.candidateandfellowatthe InstituteforGlobalLawandPolicy,HarvardLawSchool. IwouldliketothankAnalíaJaimovich,AndrésPalaciosLleras,andveryspecially,themembersoftheLANDSproject,ProfessorsDavidTrubek, Diogo Coutinho, Helena Alviar García, Alvaro Santos, Mario Schapiro, Manuel Gómez, and MichelleSánchez,fortheirvaluablecommentsandcriticisms.Also,Iwanttoexpressmydeepgratitudetothefacultyandstaff of the University of Los Andes for their hospitality and generous support to carry out my research inColombia. Special thanks go to all the interviewees, government officials, businessmen and participants in thisstudywhokindlyofferedmetheirtimeandinsightsonColombia.Needlesstosay,allmistakesremainmine.

1DuncanKennedy, ‘ThreeGlobalizationsof LawandLegal Thought:1850‐2000’, inDavidM.TrubekandAlvaroSantos, eds., The New Law and Economic Development: A Critical Appraisal (Cambridge: Cambridge UniversityPress,2006).2 David Kennedy, Law and Development Economics: Toward a New Alliance (forthcoming, 2011) (available at:http://www.law.harvard.edu/faculty/dkennedy/publications/Law%20and%20Development%20EconomicsAug15Draft%20Stiglitz%20volume.pdf,lastaccessedonJuly1,2011).

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policies,andinstitutionsdonottakeplaceinavacuum;theyareheavilycontext‐andpath‐dependant.Thefunctionsthatpoliciesandinstitutionsplay,andtheparticulareffectsthattheyproduce,respondto

the particular configuration of the context in which they operate. Once a particular institutionalarrangementisset inplaceandbackgroundrulesareconsolidated,itisverydifficulttoreversecourse.Actorsareconstitutedandtheirbehaviorisshapedbytheinstitutionalsetting;newinstitutionsacquire

meaninginthebroaderframeworkinwhichtheyare inserted.Nevertheless,actorsstillhaveroomformaneuver;rulesproduceunexpectedoutcomes,andnewruleshaveafeedbackeffect,whichalterstheoriginalconfigurationofthe“first”institutionalarrangement,creatingthusa“new”anddifferentsetting

that is in permanent flux and transformation.3 Third, based on the previous two premises and theempirical evidence collected in this study, thepaper showshow some social and economic groups inColombiahavemanagedtoeffectivelysurfchangesineconomicmodels,policiesandstrategies,taking

advantageofthebenefitsandopportunitiesthateachchangeprovides.

LikemanyotherLatinAmericancountries,duringthe2000sColombiaexperiencedimportanteconomictransformations.4Goingagainstthepoliticaltide intheregion,though,thereformswereledbyarightwing government.Unlike thecasesofChavez inVenezuela, Lula inBrazil,or Kirchner inArgentina, to

mentionjustafew,PresidentÁlvaroUribeVélez’sdiscourseandpoliciesdidnotgoagainsttheso‐called“Washington Consensus”. On the contrary, in some respects they certainly reinforced it. Still, Uribeadministration’s policies were actually muchmore than the mere reflection of ideas inspired by the

WashingtonConsensus.They representedacomplex amalgamof legaland institutionalarrangementsthat reflected political, economic and social struggles among different actors; they were built oninstitutional structures inherited from previous development strategies; and they were justified and

advanced,attimes,byrecurringtotheargumentativestructuresoftheWashingtonConsensus,butatothertimes,byborrowingfromthe langueof thenewdevelopmentconsensustoo.All inall,thenew

development strategy of Colombia showed the coexistence of a variety of institutions and differentapproaches to regulation backed by old and new arguments and ideas. Behind this mixed picture,though, it isstillpossibleto identify theprevalenceofsometypesofregulatoryapproachesaswellas

winnerswithintheprocess.

ThepaperfocusesonthreepillarsoftheColombianindustrialpolicies:exportpromotion,foreigndirectinvestment (hereinafter “FDI”) and competitiveness policies.5 Although they differ in goals and

3Pierson,PaulandSkocpol,Theda,‘HistoricalInstitutionalisminContemporaryPoliticalScience’,inIraKatznelsonandHelen V.Milner, eds.,Political Science: State of the Discipline (New York: Norton, 2002). See also, DuncanKennedy,‘TheStakesofLaw,orHaleandFoucault!’(1991)15LegalStudiesForum327.4“…between2003and2007LatinAmericaexperiencedthemostremarkableperiodofeconomicgrowthsincethelongpost‐WorldWar IIboomthatended in themid‐1970s.This growth tookplaceafteralmostaquarterofacenturyofunsatisfactoryperformance,markedbythe‘lostdecade’ofthe1980s,the‘losthalf‐decade’from1998to 2002, and a period of weak performance between the two.” JuanAntonioOcampo, ‘Latin America and theGlobalFinancialCrisis’(2009)33CambridgeJournalofEconomics703,p.703.5“Understoodinthebroadestsenseoftheterm,industrialpoliciesincludeawidevarietyofelements,traditionallydivided into six subsets: 1) trade policies; 2) investment policies; 3) science and technology policies; 4) policiesaimed at promoting micro‐, small‐, and medium‐size enterprises; 5) human‐resource training and upgradingpolicies; and 6) regional development policies.” From an alternative perspective, industrial policies can beclassified in the following way: (a) export promotion policies; (b) policies to promote innovation, higher

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instruments, what these policies have in common is that, depending on their specific design andimplementation, theyhaveadirect impacton theconfigurationanddevelopmentof the localprivate

sector.6Inallthesethreepolicyareas,duringthe2000stheUribeadministrationintroducedkeyreformswhichhavehadakeyimpactonColombia’sdevelopmentstrategy.

Thepaper isstructuredasfollows.Afterthisbrief introduction,Section2analyzesthepolicydiscourseon exports, FDI and competitiveness under the Uribe’s government as portrayed in its Development

NationalPlansof2002‐2006and2006‐2010.Then,Sections3,4and5delverespectivelyintoColombia’sexport,FDIandcompetitivenessstrategies.FollowingtheperiodizationproposedbyTrubekandSantos7,eachsectionfocusesonthechangesandcontinuitiesexperiencedbythepolicies intheseareasunder

theImportSubstitutionIndustrializationmodel(1960s‐1970s),thenundertheneoliberalmodel(1980s‐1990s), and finally during the 2000s in the Uribe administration. In order to better understand thetransformations,Section6 explores thepolitical economybehind themwithaparticular focuson the

changing configurations of the Colombian business sector and the role of international actors in theshapingandlegitimationofpolicychanges.Finally,Section7providesananalysisoftheimplicationsforlaw and legal theory of thenewpolitical economyof development. The last section sumsup the key

ideasofthepaperasawayofconclusion.

2.TheDiscourseoftheNewDevelopmentStrategyThepurposeofanalyzingthediscourseofthenewdevelopmentstrategyinColombiaisthreefold.First,itallowsustobetterunderstandthenewdevelopmentconsensus.Asaparole,theColombiandiscourse

productivityandcompetitiveness;and(c)policiestopromoteoutputgrowthandinvestment.Needlesstosay,thisdistinctionispurelyanalytical.Itwouldbehardtofindpureexamplesofthetwotypesofpoliciesintherealworld.It isnevertheless important todistinguishbetweenpolicieswhosemain effect is to increasepresentand futureoutputandpoliciesthatchangethewayoutputisproduced,presumably inthesenseofincreasingtechnicalandeconomicefficiency.Thesetincategory(c)oftheproposedclassificationconsistsofpoliciesthatcreateincentivesforproducersto,asitwere,“domoreofthesame.”Incontrast,policiesincategory(b)aimtoencouragethem“tochange theirways,” i.e., toproducemoreefficiently. Inotherwords,while, in itspure form, the firstpolicy setleadsdirectlytoincreasesinoutputandinvestmentallowingfirmstoleavetheirproductionfunctionsunchanged,thesecondset isdeliberatelydesignedtoalterfirms’productionfunctions.SeeAlbertoMelo,‘IndustrialPolicyinLatinAmericaand the Caribbeanat theTurnof theCentury’ (2001) IDBWorking Paper459,p. 13‐14; seealso,AlbertoMeloandAndres Rodriguez‐Clare, ‘ProductiveDevelopmentPoliciesAndSupporting Institutions In LatinAmericaAndTheCaribbean’(2006)IADBWorkingPaperC‐106,p.19.6Exportpromotionpoliciesconstituteamechanismthat,amongothers,helpsfirmsexpandthesizeofthemarketin which they operate. Thus firms manage to go beyond the boundaries of national economies and have theopportunity to increase their productivity thanks to economies of scale and the sophistication of managerialpractices.FDIpolicies,inturn,seekmainlytoattractcapitalandtechnology.Asitiswellknown,therelianceonFDItobolsterdevelopmentisariskyendeavorasthepositiveeffectsofFDIcannotbetakenforgranted.Inparticular,with relationtodomestic firms, foreignmultinationalsmaybeadouble‐edgesword.Whilesomedomestic firmsmaybenefit from thepresenceof foreignmultinationalsby linking theirdevelopment to the foreignpartneroracquiring their technologyandknow‐how;otherdomestic firmsmaybeoutcompetedby foreignmultinationalsanddisappear.Finally,competitivenesspolicieslooktoreducecostsaswellastocreateandprotectasetofrentswhichmayhelpdomesticfirmstoproduceandprofitablymarketgoodsandservices.7 David M. Trubek and Alvaro Santos, eds., The New Law and Economic Development: A Critical Appraisal(Cambridge:CambridgeUniversityPress,2006).

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reflects theassumptionsandstructuresof the langue thatdominates todaydevelopmentpoliciesandideas. As thisbookshows,despite thespecificdifferences in theparoles, thereseems tobea shared

developmentlanguethatcutacrossdifferentcountries,politicalideologiesandpolicyareas.Second,thesectionanalyzesthediscourseinordertoseetheroleassignedtolawandthelegalassumptionsbehindthe new consensus. When these legal assumptions are brought to the front, it is easier to see the

politicalchoicesanddistributiveconsequencesunderlyingthepolicies.Finally,whencontrastedwiththepoliciesanalyzedinthesubsequentsections,itispossibletoobservethatdespiteapparentconstraints,thediscourseisopen,flexibleandcontradictoryenoughtoallowforthedesignofaplethoraofdifferent

policies.

For the discourse analysis I take the Development National Plans. In the case of Colombia, theyconstituteakeymaterialthatreflectstheofficialdiscourseandideasofthegovernment.TheplansarepassedatthebeginningofeachPresidentialperiod.TheyarepreparedbytheNationalDepartmentof

Planning (NDP), in formal consultation of different sectors, and are eventually endorsed by theCongress. Theplan sets thebroad guidelines that orient and legitimize the economic specific policiesadoptedbythegovernment.

InthissectionIanalyzetheDevelopmentNationalPlanof2002‐2006andtheoneof2006‐2010which

set thepolicy foundationsof theUribe’sgovernment. I focus inparticularon those chapters, sectionsandpartsdevotedtoexportpolicies,FDIpolicies,competitivenesspolicies,andmorebroadly,theroleofthestateineconomicdevelopment.Althoughbothdevelopmentplansreflecttheideasofthesame

government,theypresentsignificantdifferences,includingdifferencesinstructure,styleandvernacular.WhilethefirstplanreflectedmoredirectlysomeofthecoreideasoftheWashingtonConsensus(ortheWashingtonConsensus plus, including second generation reforms), the secondplanopenly embraces

theideasandvocabularyoftheneweconomicconsensus.Itispossibletoobserve,thus,thatovertimethere is an increasing predominance of the latter in the government’s discourse. As a result, the

discourse of Uribe’s government providing the ideational anchor for legitimizing industrial policiespresented a mixed picture in which ideas characteristic of the orthodox “Washington Consensus”mergedwithtypicalideasofthenewdevelopmentconsensus.

ItwouldbebeyondthescopeofthispapertoanalyzeindepthideasoftheWashingtonConsensusand

the new development consensus. TheWashington Consensus has been widely discuss and needs nofurtheranalysishere8.Regarding thenewdevelopmentconsensus, todayan emerging“institutionalistschool”isincreasinglybeingusedbyscholarsandpolicymakers,regardlessoftheirpoliticalorientation,

tobackuptheirarguments,policies,anddecisions.ScholarssuchasDouglasNorth,JosephStiglitz,PeterEvans,MichaelPorter,DaniRodrik,RicardoHausmann,DaronAcemoglu,andeventhemoreheterodoxGary Gereffi, RobertWade, or Ha‐Joon Chang are repeatedly cited in debates, discourses and policy

documents.Despitetheirdifferences,theirdifferenttheoreticaltradition,andpolicyrecommendations,

8See,JohnWilliamson,‘WhatWashingtonMeansbyPolicyReform’,inJohnWilliamson,ed.,LatinAmericanAdjustment:HowMuchhasHappened(Washington,D.C.:InstituteforInternationalEconomics,1990);Kennedy,David,"The'RuleofLaw,'PoliticalChoicesandDevelopmentCommonSense”inTrubekandSantos(2006),supranote7;andRittich,Kerry“'TheFutureofLawandDevelopment:SecondGenerationReformsandtheIncorporationoftheSocial”,inTrubekandSantos(2006),supranote7.

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they all emphasize, in one way or another, the critical importance of “institutions” for economicdevelopment. At the risk of oversimplifying, I suggest that the core assumptions of the mainstream

versionofthenewconsensusarethefollowing.1)One‐size‐fits‐allpoliciesaredoomedtofail.Policiesthatwork inonecountrymaynotwork inothers;and2) ineverysuccessfuldevelopmentexperience,thestatehasplayedacriticalandcomplementaryrolewithmarkets.Thedichotomyofeitherthestate

or themarket is replacedby the ideaof the stateand themarket.A central corollary emerging fromthese ideas is that given thateffective development policies are highly context‐ andpath‐dependent,countriesshouldbegivenpolicyspacetoexperiment,tousetheirownjudgment,andtoexplorewhat

mightworkbestforthem.Theleastriskyandmosteffectivewaytoexperimentandlearnwhatworksbest in each case requires public‐private partnerships that bolster fluid communication and strongcooperationbetweenthestateandprivateactors9.

DevelopmentNationalPlan20022006“HaciaunEstadoComunitario”TheDNP2002‐2006:TowardsaCommunitarianStateisarelativelyshortplanascomparedtoprevious

developmentplans.Itistechnicallyratherpoorandresemblesmoreagovernmentplatformratherthanapropernationaldevelopmentplan.Itiswritteninarelativelyplainlanguageandthewayinwhichthepolicyareasareorganizedalreadygivesanideaofthepolicyprioritiesofthegovernment.Chapter1is

onsecurity, chapter2oneconomicgrowthandemployment,chapter3onsocialequity,chapter4ontransparency and efficiency of the state10. InUribe’s view, if securitywas guaranteed, then economicgrowthwouldfollow. Iwillnowfocusonheadingsoncompetitivenessandontradeof thechapteron

economic growth and employment. In both cases the Plan endorses the competitiveness and tradestrategies1999‐2009setforthbyConservativePresidentPastrana.

IntheDNP2002‐2006theconceptofcompetitivenessisfuzzy.Nonetheless,itispossibletoobservethattheplantendstohaveaformalistinstitutionalistviewofit.Competitivenessis“theframeworkinwhich

productiveactivity isdeveloped”.As in theneoclassical institutionalist view,a laNorth for example11,thestate, institutionsand the lawareseenas“the rulesof thegame”,andonce theyareset, to theextent that they are stable and clear, entrepreneurial activity and development blossoms12. State

9DaniRodrik,OneEconomics,ManyRecipes:Globalization,Institutions,andEconomicGrowth(Princeton:PrincetonUniversityPress,2007);CharlesSabel,‘BootstrappingDevelopment:RethinkingtheRoleofPublicInterventioninPromotingGrowth’,inVictorNeeandRichardSwedberg,eds.,OnCapitalism(PaloAlto:StanfordUniversityPress,2007);Ha‐JoonChang,Globalization,EconomicDevelopmentandTheRoleoftheState(London:ZedPress,2003);PeterEvans,‘TheChallengesofthe‘InstitutionalTurn’:InterdisciplinaryOpportunitiesinDevelopmentTheory,’inVictorNeeandRichardSwedberg,eds.,TheEconomicSociologyofCapitalistInstitutions(Princeton:PrincetonUniversityPress,2005);KevinGallagher,ed.,PuttingDevelopmentFirst:TheImportanceofPolicySpaceintheWTOandIFIs(London:ZedBooks,2005)10Chapter2“Impulsarelcrecimientoeconomicosostenibleylageneraciondeempleo”(Bolstersustainableeconomicgrowthandemploymentgeneration))isdividedintoninesections:1)housing;2)oilandmining;3)transport;4)publicutilities;5)science,technologyandinnovation;6)competitivenessanddevelopment;7)tradepolicy;8)environmentalsustainability;and9)employment.Chapter5focusesonmacroeconomicprojections11DouglasNorth,Institutions,InstitutionalChangeandEconomicPerformance,CambridgeUniversityPress,1990.12Competitivenessrequiresan“enablingenvironmentforthedevelopmentoftheentrepreneurialactivity”whichincludes,amongothers,“adequateinstitutions”.IntheviewoftheDNP,“theinterventionoftheStateisanessentialfactorinthecreationofafavorableenvironmentforthecompetitiveoperationoffirms”.TheDNP

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interventionand lawcaneasilytransform into“excessivered tape”whichmayhinderfirms’activities,affectingcompetitionandevencreatingcorruption13.Inordertoachievethesegoals(settingrulesofthe

game for promoting competition and avoiding excessive red tape) the role of the state is one of“coordination”. Finally, the plan associates competitiveness with increases in exports and the wayforeseentoachievethemisthroughsectorialpublic‐privateagreements.

Regardingtrade,theplanovertlyadoptsatraditionalneoclassicalview.Theplanassumesthatthemore

tradeintegration,thebetter.Moreover,“tradepolicymustnotbelimitedtotradeliberalizationortheestablishment of export promotion instruments”. It must, at the same time, “pave the way towardsopeningandderegulationofcapitalmarketsandservices”.Tradeintegrationprocessestryto“facilitate

accesstoexternalmarketsandadvanceintheharmonizationofrulesthatregulateeconomicactivity”.Theplanrecognizesthatanincreaseoftheparticipationofthenationalproductivecapacityintheworldproduction is not the automatic outcome of greater integration. However, it relegates that

consideration to a secondary level. Only “ideally”, trade policy should be accompanied bycompetitiveness increases.The legal instruments envisaged to implement thispolicyare internationaltreatieswhich should seek to eliminate access barriers, bolster foreign investment, and facilitate the

allocationofresourcestowardsmoreproductiveactivities.Inturn,ittakesforgrantedthatnegotiationswill include an “ample and ambitious” agenda that covers services, investment, governmentprocurement,intellectualpropertyrights,andcompetitionlaw14.

Finally, regarding FDI, the DNP takes the standard view according to which “foreign capital flows

facilitate access to new technologies and knowledge and contribute to external financing”. Hence, acomprehensive policy to attract foreign investment is necessary. Once again the plan shares the

furtherspecifiesthatthisstateinterventionmaterializesthroughtwomechanisms:taxesandthe“regulatorystructurerelatedtothecreationandoperationoffirms”.13Firms’activitiesareaffectedby“excessiveredtape”andrequirementsand“lackofrationality”inprocesseswithinthepublicadministration,whichleadto“barriersofentry”tonewfirms,“over‐costs”fortheoperationsofexistingfirms,and“corruption”.Inordertoaddresstheseproblems,theDNPestablishesthatthecompetitivenesspolicywilloperateinsixlines:1)eliminationofredtapeandhigherrationalityinbureaucraticprocesses;2)strengtheningthecoordinationroleofthestate;3)creationofabalancedsystemof(intellectual)propertyrights;4)generalizedaccesstoinformationtechnologies;5)developmentofencompassingpoliciesofbiotechnologyandtourism;6)promotionofefficiencyanddevelopmentofmarkets.Inturn,“inordertopromoteefficiencyintheproductiveapparatusandthedevelopmentofmarkets”itisnecessarytoestablisha“newandmorecompleteinstitutionalandlegalframeworkthatbolsterscompetitionandconsumerprotection”.Inordertoachievethis,theplanmainlyseestwoways:tostrengthenconsumerprotectionorganizationsandtoconsolidateametrologypublicagency.14TheDNPfocusesonthemultilaterallevelandtheregionalhemisphericlevel.RegardingtheWTO,theplantakestheviewthatthecurrentmultilateralsystempresentsimportantdistortionstofreetradeandseestheDohaRoundasanopportunitytoaddressthem,whichwouldallowColombiatoincreasetheaccesstoexternalmarkets,particularlyofagricultureproducts.TheplanalsosaysthatColombiawillseektoreachabalancedagreementintheFTAAnegotiationswhichwouldeliminateunnecessarybarrierstotradeandinvestment,andwould“improve”WTOdisciplines.InadditiontoincludetheMercosur,CentralAmericaandtheCaribbeanaskeytargetsinthetradeintegrationstrategy,theDNPstressesthecriticalimportanceoftheAndeanCommunity.IthighlightsthatitisthemaindestinationofColombianexportswithhighervalueadded,andtherefore,itordersthegovernmenttoworkon“theconsolidationofanAndeancommonmarket”.

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assumptionsoftheinstitutionalistneoclassicalview15:neutrality,clarityandstabilityinlegalrulesareanecessaryandfundamentalpreconditiontoattractforeigninvestments.

It isbeyondthescopeofthispapertoanalyzetheagriculturesector.However,itis interestingtonote

that incontrast totheorthodoxposition inmanufactures, in therealmofagricultureexportstheplanclearlytakesanopenmoreinterventionistapproach.16

DevelopmentNationalPlan20062010“EstadoComunitario:DesarrolloparaTodos”TheDNPforthe2006‐2010period,“CommunitarianState:DevelopmentforAll”,17presentssignificantdifferenceswithrelationtothepreviousplan.First,itiscomprehensive,clearlyorganized,wellwritten,

and technically much better than its predecessor. Unlike its predecessors, in many aspects the planresembles a scholarlywork. Academic citations abound and it takes a lecturing perspective, devotingextensivepartstoexplain,andjustify,policyproposals.

Aneo‐institutionalistapproachwithastrongrelianceonmarketmechanismsinformstheentireplan.If

the previous plan could have beenwritten by, say, Douglas North, the second plan could have beenwrittenbyDaniRodrikandRicardoHausmann.Infact,insomepartstheplanisthevirtualreproductionof the work of some of themost representative scholars of the new consensus. For example, when

discussinggrowth,theplanpresentsaliteraturereviewonthesubject,itacknowledgesthatitspurposeistoprovidethetheoreticalbackgroundforthenewpolicies,andthenitreproducesRodrik’s ideasonthe role of institutions in economic development. After recognizing that institutions play a

“fundamental” role in economic development, the plan then openly adopts a formalist, institutionalpluralist approach to development. Theplan endorses Rodrik’s idea that there is a set of“first‐ordereconomic principles for development”, as proposed by neoclassical economic analysis, which are:

protectionofpropertyrights,contractenforcement,market‐basedcompetition,appropriateincentives,sound money, debt sustainability. These principles, in turn, can be fulfilled through a diversity ofinstitutional arrangements18. The plan then concludes “the fact that there are clear basic economic

principlesdoesnotmeanthatthereisclarityregardinghowtheyshouldbeimplementedininstitutionalterms.Thewayinwhichthisplaninterpretstheaboveliteratureisinthefollowingway:therearesomebasiceconomicprincipleswhichmustberespected;however,eachcountryhastheright,andperhaps

15“inadditiontomacroeconomicstability,greatersecurity,andtheconsolidationofaclear,transparentandnon‐discriminatoryinstitutionalframework,thegovernmentwilldevelopaprogramofinvestmentpromotionthatwillemphasizethelegalstabilityandthemanyopportunitiesofthecountry”.16TheplanproposestheuseofWTOinstruments“toprotectthesectorandstabilizepricesofsensitiveproducts”inordertoprovidea“reasonableprotectiontoagricultureproduction”.Also,intheFTAAnegotiations,theplanhighlightsthatitwillsupporttheprincipleofconditionality.Regardingthecoffeesector,theplanstressesthatthepurchaseguarantee,theprovisionofpublicgoods,andthestabilizationofincomewillcontinuebeingthemajorobjectivesifthecoffeeinstitutionality.17Interestingly,alsoin2006,JosephStiglitz,leadingscholaroftheneo‐institutionalistschool,togetherwithAndrewCharltonlaunchedthebest‐seller“FairTradeforAll”18“Thequestionsaroundinstitutionaldiversityare:1)Whattypeofpropertyrights:private,public,cooperative?;2)Whattypeoflegalregime:customary,civil,oradoptorinnovate?;3)Whatistherightbalancebetweencompetitionindecentralizedmarketsandpublicintervention?;4)Whattypeoffinancialinstitutionsandofcorporategovernancearemoreappropriatetomobilizedomesticsavings?;5)Isthereapublicroleforstimulatingthegenerationandabsorptionoftechnology–protectionofintellectualpropertyrights?”.

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the obligation, to develop its own institutional forms, which give adequate expression to the basiceconomicprinciples.Thisis,toagreatextent,themaintaskofthisPlan”.

In the chapter “High and Sustained Growth”, the plan develops a section called “The strategy of

productivedevelopment” inwhichitprovidestheideational legitimationforanewroleof thestate inthe economy, and more specifically in industrial policies. The section particularly emphasizes thedifferences with the previous approach to productive policies in the following terms: “The national

policyofproductivityandcompetitivenesshasemphasized theconquestofexternalmarkets(…)[and]put forward that trade liberalization and deregulation would be enough for investors to reallocateproductive resources following the signals ofmarkets’ prices. Therefore, the prevailing ideawas that

sectorial policy should be limited to themaximum extent possible, and in thebest case, it should betransversal (…) without distinction of size, specific activity, region or level of development of theaffectedfirm”.However,theplannotes,“todayit isevidentthattheinitialendowmentoffactors,the

technological stock,or the exchange relationsdonotdetermine inanunequivocalway thepatternofspecialization of the economy. The same endowment of initial conditions allows for the existence ofmultiple market equilibriums associated with different patterns of specialization. It seems that

successful policy interventions aimed accelerating the transition from a pattern of specialization toanother have been responsible for the dissimilate competitiveness situations that two countriesmaypresent today despite having started with similar initial conditions”. Therefore, it is convenient “to

rethink our productive development policy.” Thus the plan proposes “to structure a coherent andintegralplanofpublicpolicy”basedontwopillars:1)“moreandbetterproduction”,asystemicefforttotake advantage of existing comparative advantages; 2) “the productive transformation”, to develop

competitiveadvantagesonthebasesofthecurrentcomparativeadvantages.“Itisnotenoughwiththeavailability of natural resources and its efficient economic use; it is not sustainable an insertion into

internationalmarketsbasedon lowwages,andeven less,onacompetitiveness foundedonexchangeratelags.Thecountrywon’tstopbeingpoor,ifitcontinuesproducinggoodsofapoorcountry”19.Howtoproducegoodsofarichcountrythen?Itisnecessarytomovefromaplatformbasedoncomparative

advantagestoacompetitivenessbasedontheincreasingproductivityoffactors,skilledworkforce,andstrong infrastructure. Erecting an infant industry argument, the plan concludes that competitivenessshould also be based on “a structure of tariffs and protection oriented towards the desired future

productive profile, rather than the permanent safeguard of the least efficient sectors, andfundamentally,towardsinnovationandtechnologicaldevelopment”.

Among the specific transversal policies identified by the plan to achieve these goals, it mentions“Entrepreneurial development, innovation and technological development”.Within this category, the

plan highlights the following policies: 1) Promotion of innovation and technological development forcompetitiveness; 2) Competitiveness associated with entrepreneurial productivity; 3) Internationalinsertionandtradefacilitation;4)Appropriatefunctioningofdomesticmarket;5)Specificstrategiesof

productivityandcompetitivenessformicroandSMEs. It is interestingtonote inthespecificproposalsforsomeofthesepoliciestheplanadoptsahighlyformalistapproachanditsrecommendationsdonotdiffersignificantlyfromthoseoftheoldWashingtonConsensusandsomeofthepolicyproposalsofthe19See,HausmannR.,HwangJ.,RodrickD.2005"WhatYouExportMatters"CIDWorkingPaperNo.123

11

2002‐2006plan.Whendealingwithentrepreneurialproductivity,theplanfocuseson“legalstabilityforinvestors”. In theplan’swords “the existenceof clear, predictable and stable rules enables to attract

new investments,both foreignanddomestic.Theadoption inColombiaof theso‐called legal stabilitycontractshasbeenanadequatevehiclefortheattractionofnew investors”. InthesectiondevotedtoInternational insertion, Colombia’s strategy is based on the following assumptions. The conclusion of

lastgenerationinternationaltradeagreements isaguaranteethatcountries,thatstillhavearelativelyunstablelegalenvironment,providetoinvestors,offeringthemamarginofsecuritythatallowsthemtoadoptmid‐andlong‐termdecisionswithminimumuncertainty.Forthenegotiationsoftheagreements,

the plan sets forth that they should “strengthen the standards of protection offered to foreigninvestors”.Furthermore,theplanforeseestheneedof“institutionalstrengtheningandlegaladjustmentfor taking advantage of the international trade agreements”. In this part, the plan provides that in

investment issues,theStateshouldadoptaplantostrengthen its“capacity toreducetherisksofnoncompliancewith internationalobligationsandtoresolve investor‐Statedisputes”20.Finally,withregardto the “appropriate functioning of the domestic market”, the plan focuses on the promotion of

competition, consumerprotection, strengtheningof thebankruptcy procedures, and reductionof redtape.

Concerning sectorial policies, the planpoints in possibly contradictorydirections.On theonehand, itrecognizes that the sectors or clusters that have greater knowledge content and technological

development, innovative activities, present higher growth rates in international trade, and therefore,should be the priority of target policies for productive development. However, on the other hand, itadds that activities with low technological content could also be considered as priorities since they

represent “a high potential of employment generation and income, a wide spatial coverage in thenationalterritory,aclearpotentialofcompetitiveinsertionintoglobalizedmarkets,andcreateaderived

demand with strong multiplying effects on the rest of the economy”21. After placing productivity(competitiveness)atthecenterofthedevelopmentstrategy,andunderlyingtechnology intensivenessasthemajordriverbehindit, it isnoteasytojustifytheincorporationofthissecondsetofcriteriafor

targetingsectors.Infactbyaddingthesecondset,“technology”,asatechnicalmeasurement,nolongeris as a criterion for sector prioritization. Only a political choice can decide between prioritizing atechnology‐intensivesectororasectoroflowtechnologycontent.

Finally,whenaddressing the“challenges for thecommunitarianState”, theplandevelopsprovidesan

“administrative model for the economic intervention of the State”, an “optimummodel of economicintervention”.Accordingtotheplan,thestateinterventionmustbeguidedby“anequilibriumbetweenthemarketandthepublic interestinawaythatamendsbothmarketandgovernmentfailures”. Italso

20UnlikethepreviousplanwhichfocusedontheAmericas,the2006‐2010plansetsastrategybasedonmultiplyinginternationalagreementswithtradepartnersallovertheworld.Thus,theplanseekstheinternationalinsertionthroughtheWTO,theFTAA,theAndeanCommunity,andagreementswithCentralAmericaandtheMercosur,theEuropeanUnion,andsomeAsiancountries.21Morespecifically,thegovernmentidentifiesthefollowingsectorsorclustersaspriorities:somesub‐sectorsinagro‐industry,tourism,handcrafts,informationtechnologiesandcommunications,softwaredevelopment,transportandlogistics,professionalservices(particularly,health),andwithinthetraditionalmanufacturingsector,thoseactivitiesofmediumtechnologicalcontentwithpotentialtoexpandininternationaltrade.

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stresses that themodel of state intervention recognizes that “given that state intervention implies arestrictiononeconomicfreedom,itcanonlybecarriedoutwhenitisfullyjustified”.Stateintervention

is justifiedwhen it is necessary to: a) incorporate economic efficiency given the existence of naturalmonopolies; b) eliminate obstacles that prevent competition; c) mitigate negative externalities andpromotepositiveexternalities;d)reducetransactioncosts;ande)ensureprovisionofpublicutilitiesto

theextentthatiseconomicallyandtechnicallyfeasible.Moreover,beforeintervening,itisnecessarytotakeintoaccountthefollowingconsiderations:i)theinterventionmustbetheonlyavailablemeanstoprotectthepublicinterestanditmustbestrictlycarriedouttotheextentthatitisnecessarytomitigate

therisk; ii)thecostoftheinterventionmustbe lowerthanthecostofnointervention; iii)therisksofmitigatingoravoidingmustbereasonablypredictable;iv)interventionmustbeflexibleinordertocarryoutregularreviews,tryingtotheextentspossibletoguaranteethestabilityintherulesofthegame.As

aresult,accordingtotheplan,“thecontemporarystatechangesitsdirectandglobalinterferenceontheeconomy and society for an indirect and sectorial presence. Therefore, the new dynamic of theeconomicdevelopmentprocesspresentstheneedofaspecializedalternativeintervention ineconomic

andsocial sensitiveactivities (suchaspublicutilities, financialactivities,healthservices)”.Onceagain,theplanhasadualface.Ontheonehand,itpresentsthegeneralgoals,thebroadguidelines,usingthevocabulary and appealing to the images of thenew development consensus. But on theotherhand,

when proposing specific policies, it relies on policy recommendations that repeat the cannon of theWashingtonConsensusor theWashingtonConsensusplus.Furthermore,despite theappealing to theideaofequilibriumbetweenthestateandthemarket,andthestatedneedtoaddressbothmarketand

statefailures,theconditionssetthatcouldjustifyaneventualstateinterventionaresostringentthatitishardtoseeanyactualbalance22.

To what extent the apparent contradictions in ideas and discourse were reflected in the design and

implementationofconcretepoliciesduringthe2000s?Towhatextenttheideassetinthedevelopmentplansactuallyconstrainedthedesignofspecificpolicies?Whatweretheeconomicoutcomesandactualbeneficiariesofthesepolicies?InthenextsectionsIwilltrytoprovidesomeanswerstothesequestions

inthelightoftheexport,FDIandcompetitivenesspoliciesadoptedundertheUribegovernment inthe2000s.

22Theplanalsosuggeststhat inordertoconsolidatethismodelthestatecanplaythefollowingroles:planning,

regulation, promotion, control, and direct intervention. Regarding the first role, the plan highlights the need ofstrengthening the state capacity of planning. It also points out that regulation is the paramount instrument of

intervention in the economy in order to define the rules within which individuals develop their activities. Inparticular,itmentionsthatinstrumentssuchaseconomicanalysisoflaw,riskobjectiveassessmentandalternative

regulatoryenvironmentsarepartofthebestpractices inregulation.Withrespecttopromotion,theplanfocuseson theuseof financial incentives to induce individuals to developactivities that respond topublicneedsor the

publicinterest. InrelationtotheparticipationoftheState inentrepreneurialactivities,theplannotesthatgiven“theinherentcontradictionsbetweenthepublicandtheentrepreneurialspace”thistypeofinterventionhasbeen

significantly reduced and provides a series of measures to increase the participation of private actors in theoperationsofSOEs.

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3.ExportStrategyTheUribegovernmentmadeofexportsacentrepieceofColombia’sdevelopmentstrategy.Theexportorientation,though,wasnotnewforColombia.Infact,exportpromotionpoliciesrepresentoneoftheclearest examples of policy continuity in Colombia’s development strategy. Already in the late 1990s,

the Pastrana government, fromtheConservativeparty, launched the ExportStrategic Plan1999‐2009with the goal of making exports an engine of economic growth. The Export Strategic Plan was lateradjustedandreinforcedbyUribein200423.

The importance of exports as a central component of the development strategy is not merely the

outcomeoftheneoliberalpolicyreformsorideasprevailingsincetheearly1990s.Actually,theexportoriented strategy was already one of the central components of the ISI model in Colombia. Indeed,unlikeother countries in the regionwhich tookamore inward‐lookingapproach,Colombiapursueda

clearlydefined“mixedmodel”ofISIbasedonbothimportprotectionandexportpromotion.

Despite theoverall continuity in the export strategy ofColombiasince the1960s, thisdoesnotmeanthat thestrategyhasnotexperiencedsignificantchangesover time.The remainingof this sectionwilladdresssomeofthemostsignificantchangesandcontinuitiesinexportpolicies,withaparticularfocus

onpolicydiscoursesonexportpromotion,theinstitutionaldesignofthegovernmentagenciesinchargeofexportpromotion,andtheinternationalstrategy.

TheISIoriginsAs mentioned, one of the distinguishing features of the ISI in Colombia was its emphasis on exportpromotion24,crystallizedduringtheadministrationofLlerasRestrepo(1966‐1970),leaderoftheLiberal

party.Whilethestrategywascommittedtoprotectingmanufacturingfrominternationalcompetition,italsoattemptedtograftmanufacturedexportsontotheISImodel.25

TheexportpolicyofLlerasRestreporeliedonbothmacroeconomicandmicroeconomicinstruments.Atthemacroeconomic level,thegovernment issuedtheDecree‐Law444of1967,knownas theEstatuto

23MinistryofTrade,IndustryandTourism,CircularofOctober15,2004.24Oneof the characteristicof the ISImodel in LatinAmericawas its inward‐looking focus inorder toavoid thevulnerabilityofexternalshockswhichhadprovedtobesodamagingfor itseconomies.Highcostsofproductionduetothesmallsizeofdomesticmarketsthatdidnotallowforeconomiesofscale,overvaluedexchangerates,andcertainexportpessimism,coupledwithimportrestrictionstopromoteindustrialdevelopment,ledtheregiontobecomeincreasinglydivorcedfromtheinternationaltradingsystem.AlthoughtheISImodelsoughttoalleviatethe balance‐of‐payments problems derived from the shortage of foreign exchange, in fact the inward‐lookingmodel did not solve them. On the contrary, industrial growth, especially the development of heavy industry,requiredsignificantamountsofforeigncapitaltoacquiremachineryandintermediategoods,whichledtoregularbalance‐of‐payments constraints. In order to overcome some of the initial ISI shortcomings a group of LatinAmericancountries,includingColombia,soughtanexportpromotionstrategy.TheColombianstrategywasbasedon the recognitionof three elements: first, that thedomesticmarketwasnot large enough to support firmsofoptimalsizeinmanybranchesofindustry;second,latestagesofindustrializationwerefacingbalance‐of‐paymentsconstraints;andthird,thattheColombianexportbasketwastooconcentratedoncoffeeexportsand,therefore,thewholeeconomywashighlyvulnerabletotheswingsofthecoffee‘sinternationalmarket.See,VictorBulmer‐Thomas, The Economic History of Latin America Since Independence (Cambridge: Cambridge University Press,2003).25JoseAntonioOcampo,HistoriaEconomicadeColombia(Bogota:Planeta–Fedesarrollo,2007).

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Cambiario,whichestablishedahighlyeffectivecrawlingpegsystemwhichisdeemedtohaveplayedakey role inColombia’sexport success.26Althoughhighlyeffective,as thebackboneof the ISI strategy,

the regimewaseventuallydismantled in1991aspartof theneoliberal reformspushedby theLiberalGaviria’s government. In contrast, at the microeconomic level, it is possible to observe significantcontinuities.Thisisthecase,forexample,ofthePlanVallejopolicyandtheinstitutionProexpor,which

were created during the ISI period and have played a fundamental role in Colombia’s developmentstrategyuntiltoday.

Originallyestablishedin1959,thePlanVallejowassignificantlyexpandedin1967.Overtime,itbecamea very successful drawback scheme based on tariff rebates on imported inputs entering into all

exports.27

Also in 1967, the Lleras Restrepo administration created under the Banco de la Republica,28 theColombianCentralBank,aspecialcreditprogram,theFondodePromocióndeExportaciones(“Proexpo”,Export Promotion Fund) which provided particular support through medium‐term financing for non‐

traditional exports (i.e., exports other than coffee, bananas, oil, and emeralds). Over time, Proexpoexpanded its scope and included among its functions the provision of marketing support, facilitatinginformationaboutinternationalmarkets,assistanceintradeshows,promotionofcommercialmissions

abroad,andsoon.

In the late 1960s and 1970s, the expansion of markets and promotion of exports were also soughtthroughaninternationalstrategystructuredbyinternationaltreaties.Asshownbelow,thisisastrategythat would be continued and even strengthened over time, although under a different priorities of

strategicpartnersandmodesofintegration.29

26TheEstatutoCambiarioestablishedanexchange‐ratestrategyknownasthe“crawlingpeg”whichwasdesignedtopreservetherealvalueofcurrencythroughfrequentmini‐devaluationsfollowingan initialrealignmentofthecurrency. Itplayedamajorrole inkeepingexports competitive.Themainmeritofthe crawling‐pegsystemwasthat introduced stability after the chaotic environment in which events had evolved in previous years. TheColombianexternalsectorstabilizedandtheexchangeratesystemremainedinplaceuntilthe1990s.Ontheotherhand, the CATs (certificadosde abonos tributaries), later knownasCERTs (certificadosde reembolso tributario),werealsoextensivelyused.Theyweretaxrebateswhichconsistedinacertificate,equivalenttoafixedproportionoftheFOBvalueofexports,whichcouldbesetagainstfuturetaxliability.Theseexportsubsidies,however,werelargelyeliminatedin2002duetotherestrictionsimposedbytheagreementonsubsidiesundertheWTO.Duetotheeliminationoftheseinstrumentsduringtheneoliberalreforms,theyarenotanalyzedindepth.27CarlosDiaz‐Alejandro,Foreigntraderegimesandeconomicdevelopment:Colombia(NewYork:NationalBureauofEconomicResearch,1976)28DuringtheISIperiod,ColombiaextensivelyusedsubsidizedcreditthroughtheCentralBank,specializedfinancialinstitutions and development funds. In 1940, the government created the Instituto de Fomento Industrial(IndustrialDevelopment Institute) (IFI)whichprovidedventurecapital fornew industrialendeavorsandallowedfordirectparticipationof the state in thenewly createdcompanies. In1963,Colombiaalso created the PrivateInvestmentsFund topromote industrial investmentsand exports, and the Industrial Financial Fund, in1968, topromotesmallandmediumenterprises.29However,keyshifts intheoverall strategy, inthe choiceofthetradingpartners,and inthescope,natureanddepthoftheobligationsbroughtaboutverydifferentdevelopmentalimplications.

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During theISIperiod,reflectingtheinternational ideasofCEPAL,Colombiasawregional integrationasaneffectivetooltorestoredynamismoftheinward‐lookingmodelofdevelopmentandtoprovidethe

necessary scales for efficient production. While not renouncing to a multilateral strategy, ColombiafocuseditstradeeffortsonLatinAmerica,andmorespecifically,ontheAndeancountries30.

TheneoliberalreformsIntermsofoutcomes,theColombianexportstrategypresentedamixedpicture.Ultimately,theexportpromotionstrategywasnot successful in restoring theexport sectorasoneof the enginesofgrowth.

However,thismayhavebeenforreasonsthatwerebeyondthecontroloftheColombiangovernment.31Still, the export strategy did change the composition of the export profile of Colombia; it helped todiversify the export platform and the share of manufacturing exports increased significantly,

contributing thus to thepartial transformationof theproductive structure. In otherwords, Colombiaeffectivelymanagedtoavoidtheheavydependenceoncoffeepricesandexternalvulnerability,someofthemainoriginalgoalsoftheISImodel.

Inorthodoxneoclassicaltheorythereisnoroomforkeepingexportpromotionpolicies.Althoughthey

areatypeofinterventionthatisfarshallowerthanmanyofthetraditionalISIpolicies,afteralltheystillconstituteaformofstate interventionthat instricttermsshouldbeavoided.Asproposedinstandardinternationaltradeaccounts,countriesshouldspecializeitstradepatternbasedonnaturalcomparative

advantageswheretheyfaceloweropportunitycosts32.

While in the early 1990s there already was an emerging critical literature against export promotionagencies,33theColombiangovernmentdecidedtostrengthitsexportpromotionpolicies,albeitunderadifferentinstitutionalsetting.34Thusin1991PresidentGaviria,inuseofextraordinarypowersdelegated30 In 1970 it joined the Latin American Free Trade Association (LAFTA) which would later become the LatinAmerican Integration Association (ALADI). Most importantly, in 1969, the Andean Pact, a regional integrationmechanism, was createdwith the goal of expanding the regionalmarket through gradual elimination of tariffsamong members, sector programs of industrial development, and eventually creating a custom union.Furthermore,ColombiaalsosoughttotakeadvantageofworldtradegrowthbyjoiningtheGeneralAgreementonTariffs and Trade (GATT) in 1981, and by taking advantage of the Generalized System of Preferences (GSP)sponsoredbyUNCTADbywhichtheUnitedStates,WesternEuropeandJapanprovided less‐developedcountriespreferential access to theirmarkets. See, Felipe Jaramillo, “Colombia”, inPatrickMacrory,ArthurAppleton,andMichaelPlummer,eds.,TheWorldTradeOrganization:Legal,EconomicandPoliticalAnalysis(SpringterPublishing:2005)31 The coffee boom of the 1970s led to a significant revaluation of the real exchange rate and effectivelyunderminedtheexportefforts. Inaddition,theAndeanPactwasfullofexceptionsandtheexitofChile in1976meantahardhittotheregional integrationmechanism.Moreover,developedcountriesstrategicallyusedtradeandnon‐tradebarriersthatnegativelyaffectedtheexportpossibilitiesofdevelopingcountries.See,VictorBulmerThomas,supranote28;andJoseAntonioOcampo,supranote25.32MauriceObstfeld&KennethRogoff,FoundationsofInternationalMacroeconomics(1996,TheMITPress)33See, Jagdish Bhagwati, ‘ Export‐PromotingTrade Strategy: Issuesand Evidence’ (1988)3World BankResearchObserver 1; Paul Hogan, Donald Keesing, and Andrew Singer, eds., The Role of Support Services In ExpandingManufactured Exports in Developing Countries, Economic Development Institute, World Bank (1991). Althoughstatesupportwasdisfavored,basedontheSouthEastAsianexperience,export‐ledgrowthwasencouragedbytheWorldBank.See,TheEastAsianmiracle:economicgrowthandpublicpolicy(1993)34RicardoRochaandMarceloOlarreaga,eds.,Lasexportacionescolombianasenlaapertura(Bogota:UniversidaddelRosarioandInstitutodelBancoMundial,2000)

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by Congress, divided Proexpo into two new independent agencies: Bancoldex (an Ex‐Im Bank) andProexport(anExportPromotionAgency).Bothinstitutionswerecreatedundertheumbrellaofanewly

createdMinistry of Foreign Trade, a ministry which would increasingly accumulate power within thegovernment, absorbing powers from an increasingly weakened Ministry of Economic Development,eventuallydismantled in2002by PresidentUribe. In thenew institutional structure, Bancoldexwould

providefinancialassistanceforexportsandProexportwasassignedtheprovisionofnon‐financialexportpromotionservices.35 Inaddition,regardingotherexportpromotioninstruments, thegovernmentalsomaintained and even strengthened thedraw‐back schemePlanVallejo especially after 1993. Instead,

largely due to the legal commitments undertaken by Colombia under the WTO’s Agreement onSubsidiesandCountervailingMeasures,theCATsystemhadtobesuspended.36

These changeswere reflected legally aswell. For example, Bancoldexwas organized as a second‐tierpubliccommercialbank,whichwouldbemanagedincommercialtermswithoutreceivingbudgetaryor

monetary subsidies apart from its initial capital base.37 In turn, although Proexport was establishedwithin theMinistryofForeignTrade, itwasorganizedasanautonomousendowmentoperatingunderprivate law,and itsgoverningboardwascomposedbybothpublicofficialsandrepresentativesof the

privatesector.38

Theinternationalstrategyalsoexperiencedareorientation.AlthoughwithoutrenouncingtotheAndeanintegration, Colombiasought todiversify its trading partners.Themultilateral strategy gainedweight,throughtheWTO,andregionalstrategydivertedfromLatinAmericatotheentirehemisphere,through

theFTAA.

ExportStrategyinthe2000sInthe2000sexportpromotionpoliciesweresubject tochanges.Thistime,however, thescopeof thereformswasfarmorelimitedthanthereformsoftheearly1990swithrespecttothepast.Perhapsoneofthemostnoticeablechangescanbeobservedatthediscourselevel.Unlikeinthe1990s,todaystate

interventiontopromoteexportsisseenunderapositive light.Thus,exportpromotionagencies(EPAs)likeProexportcountwiththeexplicitsupportofthemainstreameconomicliteraturewhichseesEPAsaseffective governmentalmechanismsof intervention toaddressmarket failures.39Adifferent strandof

literature, rather than emphasizing theproblemsof informationasymmetriesand transactioncosts in

35Non‐financialexportpromotionservicesareusuallyclassifiedasfollows:a)countryimagebuilding(advertising,promotional events, but also advocacy); b) export support services (exporter training, technical assistance,capacity building, including regulatory compliance, information on trade finance, logistics, customs, packaging,pricing); c)marketing (trade fairs, exporterand importermissions, follow‐up servicesofferedby representativesabroad); and d)market research and publications (general, sector, and firm level information, such asmarketsurveys,on‐line informationonexportmarkets,publicationsencouragingfirmstoexport, importerandexportercontactdatabases).DanielLederman,“MarceloOlarreaga,LucyPayton,“ExportPromotionAgencies:WhatWorksandWhatDoesn’t”(2006)WorldBankPolicyResearchWorkingPaper404436MarcelaMelendezandGuillermoPerry,‘IndustrialPoliciesinColombia’(2007)IDBWorkingPaperSeries126.37Inpart,thisreformwaspromptedbytheConstitutionalReformof1991whichprohibitedtheCentralBankfromcontinuingtoextenddevelopmentcreditthroughrediscountfacilities.38Decree2553of1999.39Ledermanetal.,supranote35.

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exportoperations,itfocusesontheimportanceofchangingtheproductionstructureandincreasingthevalueaddedofexports40.

Asmentionedbefore,theguidelinesorientingexportpoliciesduringthe2000sbasicallywerelaiddown

intheExportStrategicPlan(ESP)1999‐2009whichwasamendedbytheUribegovernmentin2004.ThiswasexpresslyrecognizedintheDNP2002‐2006whichsetthefoundationsfortheexportstrategy.ThegoalsoftheESPwerethefollowing:1)Toincreaseanddiversifytheexportsupplyofgoodsandservices

basedonworlddemand;2)Toincreaseexportsthroughthepromotionofinternationalinvestmentsandanimprovementintheconditionsforsupplyinginternationalservices;3)Toincreasefirms’productivityandexports’competitiveness;4)Toregionalizeexportactivities;and5)Todevelopanentrepreneurial

culture.

Themaingovernmentagencyinchargeof implementingtheESPwasProexport,aninstitutionthat,asseenbefore,wasbornduringtheISIperiodandwasreconvertedinthe1990s.Overtimetheagencyhasbecomeanimportantarmwithinthegovernmentandgainedtherecognitionofboththepublicandthe

private sector for its good performance.41 Thanks to its effectiveness, during the 2000s Proexportcontinued to grow and gain power within the public administration, accumulating functions andresponsibilities in investment and tourism policies.42 Benefiting from its relative financial autonomy

acquiredthroughtheinitialendowmentcreatedbythegovernmenttosupportProexportactivities,theagencyhadrelativeautonomyfromthepressuresandinstabilitiesderivedfrombudgetarypolitics,anditspersonnelhastended tohavearather technocraticprofile.43Thesefactorshavecontributedto the

relativestabilityoftheinstitution,theaccumulationofcapabilities,andthegoodqualityofitsservices.

OneofthemostnotabletransformationsinProexportduringthe2000swasitsinternationalexpansion.Indeed, Proexport notably expanded its international network, deploying almost twenty commercial

officesandrepresentationsaround theglobe.44Thisphenomenonisrelativelynewandseemstopose

40HausmannR.,HwangJ.,RodrickD.,supranote19.41 Several studies have found robust evidence of a positive impact of Proexport’s services on export growth,especiallyexportproductdiversification.MarcelaMelendezandGuillermoPerry,supranote36.42Created intheearly1990saspartoftheneoliberalreforms,overtimetheMinistryofForeignTrade, IndustryandTourismbecameapowerfulministrywhich in2002,at thebeginningof theUribeadministration,absorbedmanyofthefunctionsoftheformerlypowerfulMinistryofEconomicDevelopmentwhichwasdismantled.Thusinthe 2000s the Ministry of Foreign Trade emerged as the main governmental arm in charge of designing andadministering some of the key instruments of the new strategy. An alternative reading could bemade. Trade,investmentandindustrialpoliciesweretraditionallyunderthecontroloftheMinistryofEconomicDevelopment.During the 1990s, the foreign trade functions were given autonomy (isolation) in order to facilitate theimplementationofthetradepolicyreforms.Afterthisperiod,oncethemajorreformswerealreadyimplemented,trade,investmentandindustrycametogetheragain,thistimeunderthenewMinistryofForeignTraderatherthantheoldMinistryofEconomicDevelopment.This canbe seenasamerely formalonominaldifference. Still, thenominalchangeissymbolicallynotminor.43Despitethetechnocraticprofileofitsstaff,Proexport’spoliticalautonomyisrelativeanditsoperationiscloselyinterlinked to theMinistryof ForeignTrade.Moreover, it isexpected that the relationshipbecomesevneclosergiventhattheinitialendowmentwithwhichtheagencywasfoundedisalmostover,andconsequently,Proexportwillincreasinglyrelyonthenationalbudget.44By2010,Proexporthadmorethan23officesaroundtheworld(China,Venezuela,Mexico,Germany,Peru,UK,Spain, USA,Ecuador,CostaRica, Guatemala,Chile, Brazil, Canada,ArabEmirates, France,Russia, India,BelgiumandtheCaribbean)

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importantlegalchallengesforthestate initsnewroleasdevelopmentagent45.Themainproblemsarerelatedtothe(lackof)legalcapacityofpublicagenciestoactandacquireobligationsabroadandissues

of international responsibilitywhichmay involvedirectly thestate.So far thestate response to thesechallengeshasbeenadhocandrespondingto thespecificneedsofeachcase. Ingeneral,though,thestate has tended to limit to the largest possible extent theprobabilities of being hold internationally

responsiblefortheoperationsofitsagencies.Thewayofdoingthishasbeenbyhighlightingtheprivatecapacityandprivateinstrumentsunderwhichtheseagenciesoperateabroad.

While Proexport showedoverall continuity regarding the 1990s, Bancoldex experienced an importanttransformationmoreinlinewiththenewprevailingideasindevelopmenteconomics.In2003,theUribe

governmentdecided to liquidatetheold InstitutodeFomento Industrial (“IFI”, IndustrialDevelopmentInstitute) and transfer its standing credit lines to Bancoldex which, as shown above, in the 1990semerged exclusively as an Ex‐Imbank.As part of thenew reform, Bancoldex cancelled all existing IFI

credit lineswith the exceptionof those geared to finance small andmediumenterprises (SMEs). Thismove,though, had a critical impact on the institutional structure and profile of the bank. Since thenBancoldexhasconverteditselffromamerelyEx‐Imbankintoamultipurposedevelopmentbankwitha

strongfocusonmicro,smallandmediumenterprises.ThustodayBancoldexnotonlyprovidesfinancingforimportandexportactivitiesbutalsofordomesticmarketoperations.Furthermore,inrecentyearsithas expanded its functions to include support services and trainings for entrepreneurs of micro and

SMEs.Asaresult,inthe2000sBancoldexemergedasakeyinstitutionforthesupportandstrengtheningof local firmswhichneeded thestateassistance inorder tobecompetitive inmoreopenmarkets.Asshownbelow,thistypeofnewinstitutionsandpoliciesintendedtostrengthenSMEshaveplayedakey

roleinrestoringthepoliticalandeconomicalliancewithintheColombianprivatesector.

AnotablecaseofcontinuityreferstothePlanVallejo,originallycreatedintheISIperiodandmaintainedafter the neoliberal reforms. Although it is a high transaction costs mechanism due to the required

registrationsandapprovals,thePlanVallejo inpracticehasbecomeauseful instrumentwhich isusedmostlybypermanentlargeexportfirmsinsectorsthatareintensiveeitherinimportedcapitalgoodsorintermediateinputs(mining,chemicalsandgraphicarts,andafewagriculturalproductssuchasflowers,

banana, and sugar), for which the combined effect of duties and delays in VAT rebates can besubstantial.UndertheUribegovernment,thePlanVallejowasimprovedin200246andwasexpandedtocover exportof services in200847.Asmentionedbefore, theCERTs,a subsidyproportional to exports

gross value, were basically eliminated in 2002 due to fiscal stress and in order to comply withWTOobligations.48

45Thischallengeseemstoaffectnotonlygovernmentalagenciesbutalsootherpublicentities,suchasState‐OwnedEnterpriseswhichareinternationalizingitsoperations.Thisisthecase,forexample,ofEcopetrolorISA.Also,thisphenomenondoesnotseemtomelimitedtothecaseofColombiabuttoothercountriesintheregionaswell.See,forexample,thecasesofAPEX,PetrobrasandtheBNDESinBrazil.46Decree2394of200247Decrees2099and2100of2008.48 Exceptionally, the CERTS were temporarily revived in 2007 to compensate some sectors for the currency’sovervaluation.

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Finally, during the 2000s the international strategy for export promotion also experienced importantchangeswithin a general trend of continuity. As set in the DNP 2002‐2006, the Uribe administration

deepened the international strategy initiated in the 1990s by adopting more stringent internationalcommitments andmoving away from the Latin American focus. Themain legal vehicle used to openmarkets and promote exports was FTAs involving “WTO‐plus obligations”.49 Unlike the mechanisms

adoptedinthe1970s,thenewinternationalagreementsrepresentedadeeperlevelofintegration,lesspolicy space for the state, and expanded the coverage of policy areas to include, for example,investment, labor and environmental issues. The changes in the international strategywere reflected

also inthechoiceofpreferredtradingpartners.EspeciallyafterthefailureoftheFTAAnegotiations in2005andthewithdrawalofVenezuelafromtheAndeanCommunityofNations,ColombiaaggressivelysoughttoconcludeanFTAwiththeUnitedStates.Therelevanceofthisreorientationwassuchthatthe

US‐Colombia FTA became a central piece in the Uribe’s development and international economicstrategy.AlthoughbytheendofUribe’smandatethetreatyhadnotenteredintoforceduetoobstaclesintheUSCongress,thegovernmentwidelyusedthe treatyasapowerfuldevicetopushfordomestic

reforms. Indeed, Uribe justified an array of domestic reforms in awide set of policy areas, includingintellectualproperty,laborandenvironment,amongmanyothers,inordertoaccommodatetheUnitedStates’demandsandtoconformwiththeFTA’sfutureobligationsandstandardswhichwerepresented

asthereflectionof“modernization”,“bestpractices”and“universalstandards”.50

4.ForeignDirectInvestmentStrategyAnother cornerstone of the development strategy under Uribe’s government was foreign directinvestment. FDI policies in Colombia, though, present a very different evolution path vis‐à‐vis exportpromotionpolicies.Unlikethepolicyfoundationofexportpromotionpolicieswhichcanbetracedback

tothe1960s,attheheydayoftheISImodel,thepolicymatrixstructuringUribe’sFDIstrategywas laiddown in the early 1990s as a key component of the neoliberal program. Indeed, the FDI basic legalstructures built during the ISI period were radically transformed under the government of President

Gaviria,fromtheLiberalparty,andtheyhaveremainedsincethenpracticallyuntouched.Furthermore,themajorinitiativesonFDIintroducedbyUribeinthe2000saddedinstitutionallayerswhichdeepened

theneoliberalregulatorymodel.

Three featuresstandout in thecaseofFDIpolicies inColombiaduring the2000s.First, it seems thatinnovativeideasonFDIwhichinformtheneweconomicconsensusdidnotpermeateColombianpolicycircles and did not manage to be reflected in the Uribe administration’s policy initiatives. Second,

although these initiativeswere presented as instruments to attract FDI and werewidely targeted toforeigninvestors,inpracticetheymostlybenefitedlargedomesticfirms.Third,withinthegeneraltrendtowards deepening of the neoliberal regulatory model, in the case of the new BITs the Colombian49Inthe2000sColombiaconcludedFTAswithElSalvador,GuatemalaandHonduras,Panama,EFTA,Chile,andtheUnitedStates.50 The reforms included the launchof theDomesticAgenda initiative, apublic‐private competitivenessprogramaimed at identifying opportunities and threats posed by the FTA. See, CONPES 3297 “Agenda Interna para laProductividady la Competitividad:Metodologia” (2004). Theprogram,however,waseventuallyabsorbedwhentheNationalSystemofCompetitivenesswascreatedin2009(seebelow).

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government made timid attempts to incorporate in the negotiations clauses favouring the state’scapacity,moreinlinewiththemostrecentideasregardingFDI.

TheISImodelforFDIAs in other Latin American countries, FDI played a key role in the Colombian development strategyduring the ISI period. Recognizing that foreign aid either bilateral (through USAID) or regional (the

Alliance for Progress),and that international lending eitherofficial (WorldBank)orprivatewouldnotprovide thesufficientcapitalfordevelopment,LatinAmericancountriessoughtforalternativesources

and saw that FDI could becomea key component in their development efforts. It was expected thatmultinational corporations (hereinafter “MNCs”) would not only provide a source of capital but alsoaccess to advanced technology, management know‐how, and even international markets through

exports. Nevertheless, while MNCs could be potentially beneficial, it was clear that they could alsocrowd out domestic firms and harm domestic industrial production. Therefore, once again with thetheoretical backup of CEPAL’s work, most Latin American countries adopted FDI regimes that would

welcomeFDIbutunderclosescrutinyanddetailedregulationoftheiractivities.51TheregulationofFDIinColombiaunder the ISImodel,aselsewhere in theregion,wentthrough twoverydifferentmoments.AlthoughthroughouttheperiodFDIwasalwayswelcomeand“promoted”,thestancetowardsitvaried

considerably,bothintimeandacrosssectors.Inshort,whileinthefirstmoment,regulationrepresenteda“friendlywelcome”,orevensometimesa“naïvewelcome”,thesecondregulatorywavewasdefinitelya“hostilewelcome”.

In1967,withtheenactmentoftheEstatutoCambiario,Colombiaadoptedforthefirsttimeasystemic

andexplicitwayofregulatingFDI.52Theoverallstatedgoalofthestatutewastopromoteeconomicandsocial development and achieve an exchange rate balance through various means. Among these, itforesawthe"encouragementof investmentofforeigncapital inharmonywiththegeneral interestsof

the national economy”. The statute conditioned the investor’s rights granted in the regime to thepreviousregistrationandapprovaloftheinvestment.Thegovernment,actingthroughtheDepartmentof National Planning, had amplemargins to screen FDI and prevent it from negatively affecting local

producers.53Also,inordertocontrolcapitaloutflows,theregimelimitedthepossibilitiesofrepatriation

51See,DanielKerner,‘ECLAC,transnationalcorporationsandthequestforaLatinAmericandevelopmentstrategy’(2003)79CEPALReview83.52In1931,asaresponsetotheadverseeconomiceffectsoftheGreatDepression,ColombiacreatedtheOfficeofExchangeControlsandembarked inthefirst intendedprocessofregulationof foreigncapital inflows.Theofficegrantedpermissiontoreimburseabroadcapitalimportedintothecountryunderanymodality,aswellasinterestanddividendsfornewcapital. In1947,Colombiaestablishedforthefirsttimetherequirementofregistrationofforeigncapitalwhichwasdefinedasthecontributionsmadeinforeignexchangeearningsorindustrial,agriculturalorminingmachinery. By 1951, in an attempt to assess the real extent of foreign investment in Colombia, thegovernmentprovidedthatany importedcapital,regardlessofthemodeofentry,wasundertheobligationtoberegisteredinordertohavetherightofrepatriationortransfer.Asitcanbeseen,beforethe1960s,thelegislationexplicitlydealingwithforeigninvestmentwasshallowandhadalimitedimpactsinceitconcentratedprimarilyongetting information about capitalmovements and conditioning the investor’s rights of exchange or repatriationsimply to the previous automatic registration of the investment. See, Luis Jorge Garay, Colombia: estructuraindustrialeinternacionalización1967‐1996(Bogota:BancodelaRepublica,1998)53TheNDPwasinchargeofapprovingorrejectingFDIprojectsfollowingtheauthorizationcriteriasetforthbytheCONPES. As the general objective of the regime, the authorization criteria were also broad: a) Contribution to

21

of profits and capital, and set restrictions on Colombian firms tomake investments abroad (outwardFDI). Although the regime did not formally exclude sectors, in practice no foreign investments were

authorizedinkeysectorssuchasthefinancialsectorandpublicutilities.54

As inmanyotherpartsof thedevelopingworld, theexperiencewithMNCswasratherdisappointing55andthestancetowardsMNCssignificantlyshifted.Inadditiontonewintellectualwindsthatportrayedarather negative view of MNCs,56 important changes in the international context facilitated a second

wave of regulation of FDI. Latin American governments unexpectedly found alternative ways offinancingtheirdevelopmenteffortsthroughprivateinternationallendingandthusavoidtherelianceonMNCsandFDI.57Thesealternativesgavehostcountriesgreaterbargainingpowerandleewayforstricter

employment creation; b) Net effect on balance of payments; c) Use of local content; d) Proportion betweenimportsand investmentneedsof the foreign firm; e)Contribution to joint‐ventureswith local firms; f) Levelofcompetition inthedomesticmarket;g)Contributiontothe integration inLatinAmerica;h)Technical featuresoftheproject;i)Contributiontotheincreaseanddiversificationofexports.54Forinvestmentsintheoilandminingsectors,thestatuteprovidedaspecialregime.55AmongthemostcommonproblemsthathostdevelopingcountriesfacedwithforeignMNCswere:a)MNCstookadvantage of the access to local subsidized credit and did not bring fresh capital; b) taking advantage of theunderdevelopment of local firms, MNCs did not bring cutting‐edge technologies but rather used outdatedtechnologies thatwereno longerused inhomemarkets; c) takingadvantageofhigh levelsofprotectionof thedomestic market, most of the inward manufacturing FDI was market‐seeking (it “jumped” the import tariffsprotectingthedomesticmarketfromforeigncompetition),ratherthanefficiency‐seeking interested inexportingtothirdcountries;d)usingmoreadvancedtechnologiesandcapitaltoinvest inadvertisinganddifferentiationofproducts,MNCsmanagedtooutcompete local firmsandoperate inoligopolisticmarkets characterizedbyaboveaveragerents.See,RhysJenkins,TransnationalCorporationsandUnevenDevelopment:TheInternationalizationofCapitalandtheThirdWorld(London:Routledge,1987)56After the1950s, theoutstanding expansionofmanufacturingMNCsaround the globe called theattentionofinternationalbusinessscholars(anemergingdiscipline)whopaidacloserlookattheireconomicimpact,andbasedonempiricalstudies,theynotedthattheywerenotdeliveringwhatwas initiallyexpectedandportrayedamorenegative view than that of early development scholars. See, Stephen Hymer, The International Operations ofNational Firms: A Study of Foreign Direct Investment, (Cambridge,MA:MIT Press, 1976); StephenHymer, ‘Themultinational corporation and the law of uneven development’, in Jagdish Bhagwati, ed.,Economics andWorldOrder (London: Macmillan, 1972); Richard Barnet and Ronald Mueller, Global Reach: The Power of theMultinational Corporations (New York: Simon and Schuster, 1974). Raymond Vernon provided a more soberassessment inSovereignty atBay (NewYork: Basic Books, 1971)andStormover theMultinationals (Cambridge:HarvardUniversityPress,1977).Inaddition,inLatinAmericatheearlydependencyschool,asynthesisofMarxismandeconomicstructuralism,vigorouslyemergedandemphasizedthedetrimentaleffectsofforeignMNCs.JosephL. Love, ‘The Origins of Dependency Analysis’ (1990) 22 Journal of Latin American Studies 143; Dependencythinkersexplainedtheunderdevelopmentoftheperipherynotasaproductofaparticulardevelopmentstrategy,butasaresultofthedevelopmentoftheworldsystem.See,ImmanuelWallersteinandTerenceK.Hopkins,eds.,World‐SystemsAnalysis:TheoryandMethodology (BeverlyHills:Sage,1982);SamirAmin,UnequalDevelopment:An Essay on the Social Formations of Peripheral Capitalism (New York:Monthly Review Press, 1976); FernandoHenrique Cardoso and Enzo Faletto,Dependency and development in Latin América (Berkeley and Los Angeles:UniversityofCalifornia Press,1979);OsvaldoSunkel,El subdesarrollo latinoamericano y la teoria del desarrollo,(Mexico: Siglo VeintiunoEditores,1973); CelsoFurtado,Development andUnderdevelopment (BerkeleyandLosAngeles: University of California Press, 1964). See also, Francis Snyder, ‘Law and Development in the light ofDependencyTheory’(1980)14Law&SocietyReview723.57Theoilcrisisoftheearly1970s,whichresultedfromtheconflictintheMiddleEast,rocketedoilpricesandledtohighlevelsofinternationalliquidity.Thustheenormousamountsofpetro‐dollarsoftheMiddleEasterncountrieswere canalized through private financial institutions in the United States which found in Latin America a good

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regulation.Moreover,anincreasingnationalistsentimentfueledbythedecolonizationmovementandthepoliticsoftheColdWarprovidedthetoneforthenewregulationofFDI.

Inaddition tosome“soft law” initiatives,58ColombiaandtheotherAndeancountriessought toadopt

international“hard”rulesbythecreationoftheAndeanPact.Inanefforttostrengthentheirbargainingpowerandavoidthetypicalracetothebottomthatdevelopinghostcountrieseasilyundertakevis‐à‐vismultinationals, the Andean countries adopted a common regime on foreign investment with the

Decision 24 of 1971.59While the goal of the previous regime in Colombia emphasized the pursuit ofnational development and foreign exchange balance, the aim of the second regime was to achieveeconomic and technological independence. Interestingly, the search for greater economic autonomy

wasdevised through lesspolicy space,commonstandardsandgreater international commitments.Atthe time, “economic independence” was understood as keeping economic activities under control oflocalhands,andtherefore,severaloftheprovisionsoftheAndeanForeignInvestmentCodewereaimed

atprotectingandstrengtheningthelocalprivatesector.60

opportunity for investment. In addition, international liquidity expanded international demand for commoditiesraising their prices, and consequently, stimulating exports from the region. This export mini‐boom in turntranslatedintomoreresourcesforthegovernments.InthecaseofColombia,coffeeexportsexperiencedaboomin the mid 1970s. In addition, at the same time the country begun to benefit from the increasing revenuesgenerated by the highly profitable business of drug trafficking.While the hike in oil prices benefited Colombia,Colombia’slevelsofoilproductionandexportdidnotexpandeduntilthe1980s.58Inadditiontothetraditionallayerofregulationfocusedondomesticlegalinstruments,Colombia,togetherwithother countriesofthe region,soughttobuildan international legalregimeforFDI.PartoftheseeffortswastheUnitedNations’sinitiativetodevelopaNewInternationalEconomicOrder(NIEO)andthedraftingoftheCodeofConductonTransnationalCorporationsandtheInternationalCodeofConductontheTransferofTechnology.59 The government of Pastrana Botero incorporated Decision 24 and other complementary rules in Colombiathrough the Decree‐Law 1990 of 1973. The adoption of the code was initially blocked by the courts, whichquestioned the constitutionality of its implementation by executive decree. “The code was deemed aninternational treaty which had to be implemented through the normal legislative process. These legalcomplicationsresultedat leastinpartfromthehostilitytotheforeign investmentcode.”JorgeEsquirol,‘ForeignInvestment: Revisionof theAndeanForeign InvestmentCode’ (1988)29Harvard International Law Journal169.Interestingly,asshownbelow,inthe1990sthegovernmentalsofacedtheoppositionofthecourtstosomeofthenew FDI policies, the bilateral investment treaties,more favorable toMNCs. In this second time, however, thecourtstooktheoppositesideoftheforeigninvestors’interests.60Decision24soughtabroadanddeepregulationofFDI.Amongitsmainprovisions,thenewregimeretainedtheprevious approval procedure; promoted joint‐ventures between foreign and national companies;mandated theconversionofforeignfirmsintonationalfirmswithinatermof15years;restrictedtheaccesstodomesticcreditbyforeignfirms;reservedseveraleconomicsectorstonationalfirms;severelylimitedtherepatriationofcapitalandprofits;anddeeplyregulatedtechnologytransfersandtheroyaltiespaidfortechnologyacquisitions.The attempt to retrain foreign MNCs’ activities was particularly strong in the financial sector. In 1975, thegovernmentpursuedthe“Colombianization”ofthebankingsector,which countedwiththesupportofthe localbusinessassociationrepresentingfinancialinstitutions(AsociacionNacionaldeInstitucionesFinancieras(NationalAssociationof Financial Institutions) (ANIF).According to Law75, foreignbankswere forced to sell its shares todomestic firms.Foreignbanksthatwishedtocontinueoperations inColombiahadtotransformthemselves intojoint ventureswithin three years. The new joint venturewould be required to have no less than 51 percent ofequityownedbyColombiannationals,andanyfurthercapitalizationhadtobeundertakenbyColombianinterests.Afirmwasconsidereddomesticifforeigncapitalwas20percentorlessoftotalcapital.Upto49percent,thefirmwasconsideredajointventure.

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TheneoliberalturnaroundUnlikeexportpromotionpolicies,theColombianFDI regimewassubject toradicalchangesduring theneoliberalreformsofthe1990s.Alreadyin1987,theAndeanGroupadoptedanew“common”regime(Decision220)thatmeantmajorchangestotheAndeanForeignInvestmentCodeinformedbyDecision

24.61 Most importantly, it introduced greater flexibility to the regional framework by allowing eachcountry member to design its own specific regime on foreign capital. Indeed, although formallymaintaining someof thebasic structure andprinciples of its predecessor, the new regimeeffectively

meant a radical change. In its search for more policy autonomy, Decision 220 signaled the actualabandonmentbytheAndeanCommunityofanambitiousplantoachievecontrolledforeigninvestment

withintheAndeansubregion.Thecommonregimewasthusreplacedby individualnational interest.62Accordingly,in1991theGaviriaadministrationabolishedthe1967EstatutoCambiario,oneofthepillarsoftheISImodel,andadoptedanewforeignexchangeregimeintroducingradicalchangestotherulesof

foreign investment.63While the formal requirement of registration was maintained, the new regimeeliminated the requirement of previous authorization by the National Department of Planning. Itintroducedbroad and far reaching definitions of foreign investment and it enshrined theprinciple of

national treatment for foreign investors. But for two sectors, defense and national security, andtreatment and disposal of toxic, hazardous or radioactivewaste not produced in Colombia, no other

61 The Cartagena Agreement Commission passed the Decision 220 which Colombia implemented through theDecree1265of1987andtheCONPESResolution44of1987.Underthenewframework,foreignfirmshadbroaderrights to repatriate capital and profits, formerly banned sectors were open to foreign investors, restrictions onaccesstodomesticcreditbyforeignfirmswererelaxed,theperiodtotransformaforeignfirmintoanationalonewasextended,andtheobligationtosell the investmentonlytodomestic investorsandformjoint‐ventureswasabolished,exceptforthosefirmswhowantedtoenjoythetradebenefitsoftheAndeansub‐regionalmarket.62“Thechanges introducedbyDecision220haverenderedtheAndeanForeign InvestmentCode innocuous.Theeffectivenessofthecoderesidedin itsadoptionofsystematicforeign investmentregulationsthatappliedtoandwereintendedtobenefittheentiresubregion.Althoughthecodedidpermitflexibilityanditsprovisionswerenotfollowedrigidlyineverycase,itdidestablishacommonposturefromwhichdeviationsrequiredsomedegreeofjustification. The parallel requirements across the subregion enabled the members of ANCOM to mutuallyreinforce their positions and maintain their agreed development priorities. The elimination of the commonstandardsnegatesanyvaluethecodemighthavehad inenhancingthebargainingpositionofANCOMcountriesvis‐à‐visforeigninvestors.”JorgeEsquirol,supranote59,176.Asanexception,thenewregimeretainedDecision’s24 annual limit on repatriation of 20% of the foreign capital invested. A few years later, Decision 291 of 1991further reinforced this regime. Among others, it allowed the countrymembers to consider as ‘foreign capital’intangibletechnological contributions suchastrademarks,designs,technicalassistanceandtechnicalknowledgepatentedandunpatented; itestablishedthateachcountrywasfreetoauthorizethe levelof freetransferofnetprofits; it recognizedthat investorscouldrepatriatetheamountsobtainedasaresultofthesaleoftheirshares,rightsandparticipations;and it set forth thatdisputes settlementmechanismswouldbedealt according to therulesadoptedbyeachindividualcountrymember.63 During the 1990s, the foreign investment regime established in 1991 suffered several amendments.Nevertheless, none was significant and in all cases they were towards greater liberalization. See CONPESResolutions52of1991;53,55,56,and57of1992;and60of1993;andthedecrees2348of1993;98,1812,2012,2764of1994;517of1995;1295of1996;1874of1998;and241of1999. In theyear2000,PresidentPastranaintroducedfewmorechangesandsystematizedtheregimeastheGeneralRegimeofForeignCapitalinColombiaandColombianCapital Abroad (Decree2080). In2003, lastly, PresidentUribeVelez introduced someadditionalminoramendments.

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sectorswere excluded from foreign investment.64Once an investmentwas registered, therewerenorestrictionsontransfersabroadofprovennetprofitsandremittanceofamountsreceivedasproceeds

fromthesaleoftheinvestmentwithinthecountry,orfromliquidationofthecompanyoritsportfolio,or froma reduction in its capital.65 Finally, unless otherwise stated in theprovisions of theprevailinginternational treaties and conventions, the provisions of Colombian legislation applied for the

settlement of disputes involving foreign capital. Similarly, unless the contracting parties agreed tosubmitdisputestointernationalarbitration,suitsweretobefiledbeforetheColombiancourts.

Whileinthelate1980sColombiasoughttogainpolicyspacevis‐à‐vistheAndeanFDIcommonregimeinorder unilaterally regulate capital inflows, during the 1990s Colombia restrained its policy autonomy

regardingFDIandadoptedrigidcommitmentsatboththemultilateralandbilaterallevels.Inthisregard,Colombia followed the two‐track strategy of adopting international rules both multilaterally andbilaterally. As a Member of the WTO, Colombia adopted stringent obligations concerning FDI in the

Agreement on Trade‐Related Investment Measures (TRIMs), the General Agreement on Trade inServices (GATS) and the Agreement on Trade‐Related Aspects of Intellectual Property Rights (TRIPS).Also at themultilateral level, Colombia joined theMultilateral Investment Guarantee Agency (MIGA)

and the International Centre for Settlement of InvestmentDisputes (ICSID) under the auspices of theWorldBank.

At the bilateral level, Colombia also signed a few bilateral investment treaties (BITs) which usuallyestablishedevenhigherlevelsofprotectionforforeigninvestors(WTO‐plusobligations).66Thisstrategy,

however, suffered a temporary impasse when the government faced the opposition of theConstitutionalCourt.TheCourtpointedoutthatthesetreatieswouldbeunconstitutionalgiventhattheColombianConstitutionsetsforththepossibilityofexpropriationwithoutcompensationonthebasisof

equity reasons, an exception which is not foreseen under the BITs.67 Still, after a constitutionalamendmentin1999,thegovernmentwasabletocontinueusingtheseinternationalinstruments.68This

impassewouldusuallygounnoticedandwouldbepartofthenormalpoliticalandlegaldifficultiesthatagovernment may face when trying to implement reforms. However, the obstacle that delayed theadoption of BITs had important, unforeseen, consequences. As shown in the next section, once the

constitutionalobstaclewasovercome,inthe2000stheUribe’sgovernmentre‐launchedthestrategyofusingBITs. This time,however, the international contextand theshapeofBITshad changed inawaymorefavorableforhoststates,andColombiaunexpectedlybenefitedfromit.

64Also, there remained some restrictions regardingownership composition in radioand televisionbroadcastingcompanies, sectorsdominatedby traditional local firmsandmajor economicgroups. Also, itmaintained specialregimesforoilandminingandthefinancialsector.65Exceptionally,restrictionsonremittanceandrepatriationcouldbe imposedwhen internationalreservesfall tolevelsequivalenttolessthanthreemonthsofimports.66BITswithUnitedKingdom,Cuba,Peru,andSpain.67 See,ConstitutionalCourtdecisionsC‐358 (1996),C‐379 (1996),C‐008 (1997),C‐494 (1998). It is interesting tonotethat,asmentioned innote41,thepreviousregimebasedonDecision24wasblockedbythecourts inpartdueto itsexcessiverestrictionsonforeignmultinationals.Inthe1990s, instead,theConstitutionalCourtblockedtheBITsandtookapositionrathercontrarytotheinterestsoftheforeigninvestors.68LegislativeAct01(1999)

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IntermsofthemaininstitutioninchargeofpromotingFDI,thegovernmentdecidedtofollowamodelsimilartothatofexportpromotion.Thus in1992itcreatedCoinvertir(InvestinColombiaCorporation)

as an autonomous public‐private non‐profit corporation operating under private law. Its goal was topromoteandfacilitatethedevelopmentandconsolidationofforeigninvestment,and itsfunctions,farfrom the screening and monitoring of investments common during the ISI period, were to promote

Colombiaasaninvestmentlocation,assistpotentialinvestors,provideinvestorswithafter‐careservicesand conduct investment climate monitoring with recommendations for improvement. Coinvertir wasfundedbythegovernmentandprivatecontributions,withtheprivatesectoroccupyinghalftheseatson

itsexecutiveboard.

FDIstrategyinthe2000sDuringthe2000s,FDIcontinuedtobeseenasanengineforgrowthanddevelopmentinColombia,andtheFDI strategymeantnothingbut deepening theneoliberal regulatorymodelof the1990s.69Withinthis trend, at least two phenomena are worth highlighting. One is that FDI policy and discourse in

Colombia remained immune to the rise of the new institutionalist economic ideas which have latelygained space in development debates, as reflected for example in the DNP 2006‐2010. Despite thestressof theDNPon the importanceofpolicy experimentation,with regard toFDImatters, Colombia

adopted highly formalist approach, embracing “international standards” (the one size that fits all),seekingtorestrainthestate’spolicyspacetothegreatestextent,forexamplethroughBITs,undertheassumption that the limitation of the state’s levels of discretion would attract more FDI inflows.

Followingthisrationale,Uribe introducedaseriesofpolicy initiatives, likethe legalstabilitycontracts,which consolidated the regulatorymodel and further limited the state’s capacity.What is interestinghere is that despite beingwidely portrayed as amechanism to attract FDI, in fact these instruments

weremostlyusedbylargelocalfirms.

Beforedelving intospecificpolicies, it is important tonotea significant institutional change that tookplaceinthe1990s.ThefateofCoinvertirdidnotfollowpathofitsexportcousin,Proexport.Unlikethelatter,dwindlingcontributionsfromboththepublicandtheprivatesectorsmeantthatafterafewyears

Coinvertir’spositionbecameuntenable.70Financiallyweak,understaffed,and largely reactive, in2005the government, following the recommendations of the study developed by the Irish DevelopmentAgency,decidedto liquidate itand transfer its responsibilities toProexport,expecting tocapitalizeon

potentialsynergiesbetweenFDIandexportpromotionactivities,aswellastourism,anotherpolicyareaunder the control of the promotion agency.71 As a result, one single agency remained in charge ofexports,investmentsandtourismpromotion.Thiswasrelevantnotonlyintermsofbureaucraticpolitics

and state capacity, but also in terms of cross‐pollinations.72 The incorporation of foreign investment

69See,CONPES2969“PlanEstratégicodelaInversión”(1997)andCONPES3135“LineamientosdePolíticaparalasNegociacionesInternacionalesdeAcuerdosdeInversiónExtranjera”(2001).70UNCTAD,ColombiaInvestmentPolicyReview(2006)71 In organizing its investment promotion services, Proexport received the assistance of the Irish investmentpromotionagency(IrishDevelopmentAgency, IDA),consideredtobeoneofthebest‐run investmentpromotionagenciesintheworld.72 One consequence of this has been the emphasis on the country’s image –“Colombia is passion” – in theapproach to FDI policy. Indeed, given the association commonly held among foreign investors that Colombia is

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activities within the portfolio of Proexport not only increased the power of the agency within thegovernment, but also yielded positive results. Investment promotion activities experienced a notable

and vigorous rebirth under the institutionalmanagement of Proexport. Thus in 2009 Proexport, as aforeign investment promotion agency, was ranked 16th among 181 investment promotion agenciesaroundtheworldaccordingtotheGlobalInvestmentPromotionBenchmarking2009elaboratedbythe

World Bank. Another side effect of the effectiveness of the agency has been that, in its efforts topromote FDI, over time Proexport became the main voices of foreign TNCs within the Colombiangovernment, lobbying for regulatory reforms that would please foreign investors’ interests, and

eventually,leadtogreaterinvestments.73

Under the Uribe administration the general domestic legal framework for FDI did not experience anymajorchange;i.e.,thebasicstructurecontinuedtobethesamethatPresidentGaviriasetin1991.Ontheotherhand,the internationalstrategywassignificantlyreinforced. Indeed,continuingthetrendof

the1990s, in the 2000sColombiaadoptedstringent international rules thatgrantedample rightsandguarantees to foreign investors and in turn restricted the State’s regulatory capacity. While manycountries intheregionduringthe2000ssteppedbackfromadoptingmoreinternationalcommitments

restricting their policy space, Colombia, on the contrary, aggressively sought to conclude BITs andinvestmentchaptersinFTAs,i.e.,WTO‐plusobligations,limitingitsmarginofmaneuver.74AwareofthedubiouscapacityofBITstoattractFDIbutatthesametimeofthehardshipoftheirsanctionsincaseof

dispute, the Uribe administration used the conclusion of BITs largely as a marketing strategy andsignaling mechanism.75 During the 2000s, Colombia signed BITs, in part, in an attempt to distinguishitselffromitsAndeanneighborsVenezuelaandEcuador,whoadoptedanopenlycriticalstancetowards

foreign investor, particularly in the energy sector. The goal was to show that Colombia followed theinternationalstandardsofprotectionofFDI,andinthisrespect,thestrategywasrathersuccessful.76

related to guerrilla and drug trafficking, the government and FDI related agencies have devoted, with greatsuccess,largeresourcesandsignificanteffortsintochangingColombia’simage.73 Until the late 2000s, Proexport participated in the BITs negotiation process representing the investorscommunity’s interests.However, later the responsibilitieswereconcentrated ina specializeddepartmentwithintheTradeMinistrywhereProexportprovides,atleastformally,noinput.74 Robert Wade, ‘What Strategies are Viable for Developing Countries Today? The WTO and the Shrinking ofDevelopmentSpace’inKevinGallagher,ed.,PuttingDevelopmentFirst:TheImportanceofPolicySpaceintheWTOandInternationalFinancialInstitutions(London:ZedBooks,2005);KennethShadlen,‘ExchangingDevelopmentforMarket Access?: Deep Integration and Industrial Policy under Multilateral and Regional‐Bilateral TradeAgreements’ (2005) 12 Review of international political economy 750. For an alternative view, see Amsden…,Santos…75 Government officials recognize that inmany cases the BITs are not a requestmade by the investors beforemaking an investment. Moreover, often Proexport officials have to explain to potential investors the benefitsarisingfromtheBITsandDoubleTaxTreatieswhichhavemanylegaltechnicalitiesthatareincomprehensibleforthe lay‐investors. As recognized by government officials, the vastmajority (“95%”) of foreign investors do notknowwhat a BIT is. See, JasonWebb Yackee, ‘Howmuch doU.S. corporations know (and care) about bilateralinvestmenttreaties?Somehintsfromnewsurveyevidence’(2010)ColumbiaFDIPerspectives3176 In 2009, for example, thanks to a great extent to the high number of BITs concluded in the previous years,Colombiaachieved the topof the LatinAmerican ranking of theDoing Business Reportproducedby theWorldBank. It is important to take into account that the DBR weights number of changes in legislation rather than

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Within this general trend towards increasingly stringent international commitments, though, it ispossibletonotesomeattemptsatretainingsomedegreeofcontroloverdomesticregulatorydecisions.

Thanks totheunexpecteddifficultiesthatthegovernmentfaced in the1990stoadoptBITs,Colombiaunintentionallybenefited frombeinga latecomer in thewaveof signingBITs. As seen in theprevioussection,duetotheConstitutionalobstacleregardingcompensations incaseofexpropriationbasedon

equityreasons,ColombiawasnotabletobuildanextensivenetworkofBITsasothercountriesoftheregiondid–mostnotablyArgentina.77However,aftertheConstitutionalobstaclewasfinallyovercomein 1999, andpaved theway for Colombia to adopt international commitments, the financial crisis hit

Argentinain2001.TheArgentinecrisisunleashedanunprecedentednumberofcasesbeforetheICSID,showingtheBITs“inaction”andtheactualeffectsofthe1990s‐generationofBITs,especiallyregardingthedisputesettlementsystem.StudiesstartedtoshowthatBITs’effectsonattractingFDIare,atbest,

dubious.78 Still, the dispute settlement mechanism of BITs showed that they are unbalanced againststate’sinterests.Theycanbequiteeffective inprotectinginvestors’interestsandapplyingsanctionstohost state, and therefore, constraining state’s capacity to act and carry out policies which have

traditionally been considered within the state’s proper domain.79 As a result, learning from theexperienceoftheArgentinecaseandothercountries,during the2000sColombiaadoptedarelativelymore cautious approach to BITs if compared to the first wave of the 1990s. For example, Colombia

selected and prioritized the countries with whom it would conclude BITs in accordance to its newdevelopmentstrategy;80 itdevelopedaColombian“BITmodel”whichfollowedthegeneralframeworkandethosofthe2004USBITmodel,butatthesametime,it introducedsomeimportantamendments

aimedat securingsomepolicy space,defending the state’s interest.81Colombiaalso createda specialcommitteetodevelopadefensestrategyincaseofdisputesettlement;anditpromotedjointactivities

aimedatexchanginginformationwithotherhostcountriesinordertolearnfromtheirexperiences.

absolute numbers. Thus although countries such as Argentina or Chile have concluded far more BITs thanColombia,thelatterhasconcludedmoreBITsthananyothercountryintheregioninthelastyears.77Whileinthe1990sColombiasigned4BITs,Argentinasigned56.78 See, Roberto Porzecanski and Kevin P. Gallagher, ‘Economic Reform and Foreign Direct Investment in LatinAmerica:ACriticalAssessment’(2007)7ProgressinDevelopmentStudies21779 See,MaryHallward‐Driemeier, ‘DoBilateral InvestmentTreatiesAttract ForeignDirect Investment?Onlyabitandtheycouldbite’(2003)WorldBankPolicyResearchWorkingPaper312180By2010,Colombiahadsignedinvestmentagreements,eitheras investmentchapters infreetradeagreementsor as BITs, with the following countries: United States, Canada, European Union, United Kingdom, Spain,Switzerland, China, India, Korea, EFTA, Mexico, Chile, Peru, Guatemala, El Salvador and Honduras. AgreementswithBelgium,Germany,andFrancewerestillundernegotiation.81 Colombia has realized about the enormous advantage that implies sitting at the negotiation table with apreviouslycraftedBITmodel.ABITmodelnotonlysetsaframeforthenegotiationprocess, italso increasesthebargainingleverage.Themodel,generallyagreedamongdifferentgovernmentagencies,setstheupperandlowerlimitsofthebargainingpossibilitiesbeyondwhich, inprinciple,thenegotiators cannotconcede.Naturally, theserigidities limit the possibilities of reaching an agreement. In practice, however, these limitations are not soconstraining. First, fromabroadperspective, themodel is largelybasedon the standardsusually found inmostBITs, which facilitates the negotiations and finding common grounds for agreement. And second, there areexceptions to the upper and lower limits depending on who is the counter‐party in the negotiations. Thus, forexample,Colombiahasagreedtoincludean“umbrellaclause”intheFTAwiththeUnitedStates;aprovisionthatisexcludedfromtheColombianBITmodelandisgenerallyconsideredtobeadealbreakerissueinnegotiationswithothercountries.

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Besides the investment promotion activities carried out by Proexport and the BITs, the Uribe’sgovernmentenvisaged threepoliciesaimedatpromotinginvestments:LegalStabilityContracts(LSCs),

Free Trade Zones (FTZs), and sector‐specific fiscal incentives. Although offered to foreign investors,these instrumentsareactuallyopen toboth foreign anddomestic investors.Sector‐specific incentivesconsist of traditional income tax exemptions for a specific period of time. According to Colombia’s

legislation,companieswhichbenefitfromtheseincentivespaya0%incometaxrateforaperiodoftimeandoncethattermisovertheyaresubjecttothegeneraltariffwhichis33%.Althoughtheseincentivesareofferedtobothforeignanddomesticinvestors,dependingonthesector,inpracticetheyareeither

mostly used by foreign investors or by local investors depending on whether the sector is mainlydominated by foreign TNCs or domestic firms.82 The other two instruments (FTZs and LSCs), whilehorizontalsector‐wise,theyareexplicitlytargetedtolargeinvestments,thusbenefitinglargeColombian

firmsandforeignMNCs.

In2007Uribe’sgovernmentenactedanewregimeforFreeTradeZones(FTZs),throughtwosuccessivedecreesbasedon theLaw1005of 2005.83 Law1005permitted thegovernment to complywithWTOmandatesbyconvertingoldFTZs,createdduringthe ISImodel, togeneral‐purposefreetradezones in

which firmswould be able to import capital goods and inputs free of taxes (tariffs and VAT) and besubjecttoareducedcorporate incometaxrateof15percent.84Thedecreesextendedtheseprivilegesnot just to existing export promotion zones,85 but also to a wide variety of temporary and even

82 The selected sectors and timeframe of benefits are the following: 1) hotel services provided in new hotelsconstructed between 2003 and 2018, for 30 years; 2) hotel services provided in hotels remodeled and/orexpanded up to 2018, for 30 years; 3) ecotourism services, for 20 years beginning in 2003; 4) late yield cropsplantedbetween2003and2013,for10years;5)newmedicinalandsoftwareproductsmanufacturedinColombiawithahighcontentofnationalscientificandtechnologicalresearchandcoveredbynewpatentsregisteredbeforethe appropriate authorities, for 10 years beginning in 2003; 6) electric power sales produced by generatingcompaniesbasedonwind resources,biomassoragriculturalwaste; fora15‐yearperiod;7) river transportationservicesprovidedwithshallowdraftshipsandbarges,for15yearsfrom2003;8)publishingcompaniesdevotedtopublishingbooks,magazines,brochuresorscientificor cultural collectibleseries, for20yearsbeginning in1993.Onthedubiousdevelopmentaleffectsofthisandotherfiscalincentives,seeLouisWells,Jr.,NancyAllen,JacquesMorisset,andNedaPirnia, ‘UsingTaxIncentivestoCompeteforForeign Investment:AreTheyWorththeCosts?’(2001)ForeignInvestmentAdvisoryServiceOccasionalPaper15.ForthecaseofColombia,seeArturoGalindoandMarcelaMelendez,‘CorporateTaxStimulusandInvestmentinColombia’(2010)IDBWorkingPaperSeries173.83Decrees383and4051of2007.84Therangeofbenefitsoftheregimeincludethefollowing:a)Single15%incometaxrate(thisislessthanhalfthefull rateof33percent) for industrialusersofgoods,servicesandoperators,exceptfor commercialusers;b)Nocustom taxes onmerchandise imported from abroad; c) VAT exemption got rawmaterials, inputs and finishedgoodssoldfromanationalcustomterritorytoindustrialusersofFTZs;d)VATexemptiononmerchandisesalestoforeign markets; e) Possibility of performing temporarily partial processing outside of the FTZ; f) Possibility ofsellinginsidethenationalterritory100%ofthegoodsorservicesproducedintheFTZwithcustomtariffandVATpayableonlyonthepercentageofinputsimportedfromthirdcountries.85 Earlier FTZs were established basically as free import zones under Law 105 of 1958, mostly for holdinginventoriesofimportedgoodsthatwouldpaytariffswhenretiredfromtheFTZforuseorsale.In1985,Law109established a modernized Free Trade Zones regime for Exports. Under the new law, six additional FTZs werecreated before 2005. FTZ investment, exports and employment grew rather slowly and never covered a highproportionofexports.Duetotherequirementofgeographic locationofFTZs,firmspreferredthebenefitsoftheeffectivePlan Vallejo. By2004 exports fromFTZswere just4.1percentof total exportsas compared to figuresabove 50 percent inMexico, Central America, Dominican Republic, Puerto Rico, Malaysia, Czech Republic, and

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permanent zones, including ports, mining zones, and even individual projects or firms, regardless oftheirlocation,aslongastheycomplywiththerequiredminimuminvestmentoremploymentlevels.86

In order to benefit from this scheme, the investment project needs the government’s approval.

Interestingly,thelegalstructureadoptedtoadministerthis instrument largelyresemblesthestructureof the FDI regulation under the ISI model. Indeed, at the time of evaluating the investment plan, agovernment commission must take into account the contribution offered by the project to the

modernization and reconversion of the productive goods and services sectors, its ability to improvecompetitiveness, increase and diversify the supply, and its contribution to scientific or technologicalresearch. In addition, specific requirements are set depending on the type of investment (goods,

services,health,agribusinessandbio‐fuels,ports),andonlya fewsectorsare excluded.87However, inspiteoftheformalselectioncriteriaintendedtoguaranteeaneutralprocesstochoosethebeneficiaries,inpolicycirclesandtheprivatesectorit iscommonlybelievedthatthesedecreeswere“negotiated”to

makesure thatparticular investmentprojectswould fit the requiredconditions. Inpractice,whathashappenedisthattheFTZregimeturnedintoamechanismtogranttaxbenefitstolargefirmsinamoreor lessdiscretionaryway.88After theenactmentofthenewregime, in themidstofgreatcontroversy,

thenumberofFTZsexponentiallygrewfrom11toatotalof55approvedprojects.89

Theothermajor instrumentdevelopedbytheUribeadministrationtobolster investmentsinColombiawas the Legal Stability Contracts (LSCs). Perhaps better than any other economic policy, the LSCsinstrumentbest reflectedandput intopracticeoneof thecentralpillars of PresidentUribe’spolitical

discourse: investor’sconfidence.LikeinthecaseofBITs,therationaleunderlyingtheinstrumentrelieson thebasic assumption that private investment decisions are anoutcomeof legal certaintywhich isalmostinevitablyunderminedbythestate’sactions.Therefore,theargumentgoes,inordertopromote

Chinawhohavereliedextensivelyinsuchaninstrumentforexportpromotion.ThusEFZswereconvertedin2007togeneralpurposeFTZs,inordertoadapttoWTOagreementsbutalsoto instituteapreferentialtaxregimeforlargeinvestments,whetherorientedtodomesticorforeignmarkets.86 It establishes that Free Trade Zones are “geographical areas” defined within the national territory for thedevelopment of industrial goods and services or commercial activities under a special tax, customs and foreigntraderegime.Thestatedgoaloftheregimeisthecreationofjobsandattractionofnewinvestments.Interestinglyenough, inthecaseofprojectsrepresentingahigheconomicandsocialimpactforthecountry,anewfigurewascreated,knownasaSpecialPermanentofSingle‐EnterpriseFreeTradeZone(SEFTZ),regardlessoftheirgeographiclocation.EvenexistingfirmscanbeconvertedintoanFTZiftheyundertakeasignificantexpansionofproduction.87 These are non‐renewable natural resources, financial services, state concessions, residential utilities, exceptthose devoted to electric power generation and new companies which provide international long‐distancetelephoneservices88Fedesarrollo,‘ElNuevoRegimendeZonasFrancas’(2008)EconomiayPolitica3489 Businessmen recognize that these tax incentives do not affect in a significant way their long‐term “businessplan” (expansionsandproductdiversification). They,of course,admit that theyareawelcomeaddition to theircashflowsandthat,onoccasion,they influencethechoiceoftechnology(byallowingthemtochoosethemostexpensive,presumablymorecapital‐intensive,technology).Furthermore,authoritiesandbeneficiariesareawarethattheregimeiscreatingmajortaxdiscriminationamongcompetingfirmsandthatthesituationwillbepoliticallyuntenable in the future. Because of this, in turn, firms benefiting from the new regime have entered into taxstability agreements with the government. Finally, as the tax reduction for new investments and the new FTZregime evolved independently, it seems that neither the government nor Congress realized they could becumulative.See,MarcelaMelendezandGuillermoPerry,supranote36.

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investments,andconsequentlygrowth,thestatemustrestraintitself.AccordingtoLaw963of2005,afirm, either foreignor national,may sign a contractwith the State bywhich the firmmaking a large

investment(over1,500,000USdollars)acceptstopayapremiumequivalentto1%ofthetotalannualinvestment. In exchange, the State is obliged to “freeze”, that is, continue applying to the particularinvestorthespecificrulesandregulationsdeemeddeterminantoftheinvestmentdecision,whichmust

beexpresslyspecifiedinthecontractsignedbetweentheinvestorandthestate.Thecontractsmaylastbetweenthreeandtwentyyears,andthekindofnormsthatmaybesubjecttofreezingissignificantlybroad.90Portfolioinvestmentsareexcluded,butnoeconomicsectorisbarredfrombenefitingfromthis

regime. Incaseofdispute, it ispossible tosettle it inanationalarbitral tribunalwhoshallonlyapplyColombianlegislation.

Themechanismadopted to administer the concessionof LSCs is similar to that of FTZs. The LSCs aresubjecttoapreviousapprovalbyagovernmentalcommitteethatneedstofollowasetofformalcriteria

and guidelines set forth by the DNP and CONPES.91 Thus an investor seeking to benefit from thesecontractsmust submit a requestwith detailed information about the investment proposal, feasibilitystudies,originoffunds,andthenumberofnewemploymentsthattheprojectexpectstogenerate.Asin

thecaseofFTZs,thesetofcriteriaisbroadenoughtoallowaconsiderablemarginofdiscretiontothereviewingcommittee.Also,theproceduresforapprovalleaveenoughspaceformaneuvertothestate,and therefore, it enables thestate tospeedupordelay theprocess forparticular firmsandprojects.

Interestingly,thissignalingmechanismhashadeffectscontrarytotheintendedones.Ontheonehand,likeinthecaseofBITs,themerefactofprovidingspecialprotectionsandextramechanismstolimitthestate’scapacitytoactshowsthatthestate,particularlyintheeyesoftheowngovernmentinpower,is

notreliableorstableenoughtoofferproperconditionsconductiveto investment.Ontheotherhand,whiletheinstrumentmaybeeffectivetoserveasamarketingmechanismforforeigninvestorsunaware

of the realities of the Colombian economy, local and foreign investors with experience and goodknowledgeof thepolitics and economyof Colombia know that this instrument has beenusedby thegovernment with ample discretion inmany cases, undermining therefore, the image of transparency

andneutralitythatthegovernmenttriestoconveytoconsolidateinvestor’sconfidence.

By the endof Uribe’smandate,more than 60 contractswere approved and46were actually signed.Onceagain, themainbeneficiariesweretheColombianlargefirms.ForeignTNCsalsobenefittedfromthismechanismalbeittoalesserextent;onlyabout30%ofthecontractsweresignedwithforeignTNCs.

Althoughinprincipleabroad typeofrulescouldbefrozenundertheLSCs, thecontractswerealmostexclusivelyusedforprotectionoftaxschemes.Mostofthestabilizedlegalprovisionswere,byfar,intheEstatuto Tributario, or closely‐relatedprovisions on tax and tariffs. This shows that after all, the LSCs

workedasaninsuranceforalimitednumberoffirmsagainstfuturetaxraises.Atthesametime,italso

90 Itmay include lawspassedbyCongress,decreesoftheExecutive,administrativeactsofnationalentities,andeven binding administrative interpretations. Also, “frozen” norms may be whole statutes, specific articles,numeralsorevenparagraphs.Theonlynormsthatremainexcludedarethoserelatedto:socialsecurity,taxesorforced investments required by the State under the state of exception, indirect taxes, prudential financialregulation,andthetariffsregimeofpublicutilities.91SeeCONPES3366“ConsideracionesTecnicaspara laEvaluaciondeSolicitudesdeCelebraciondeContratosdeEstabilidadJuridica”(2005)anditsamendmentinCONPES3406(2005).

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shows that behind the investor’s interest in “legal certainty” and a “stable legal environment”, ideasthatmanytimesareseenasconstitutiveelementsofthe“ruleoflaw”,thereissimply,andtoanextent

understandably, an interest in not having the state altering taxes, a policy instrument that directlyaffects the economic equation of their businesses either diminishing the margin of profits or evenmakingtheinvestmenteconomicallyunviable.

5.CompetitivenessStrategySincethe1990sanewtypeofindustrialpolicyhasemergedinLatinAmerica.Underdifferentlabelssuch

as“productivepolicies” or“competitiveness policies”, the governmentsof the regionhaveadoptedaseriesofpolicy initiatives justifiedasattemptsbroadlyaimedat increasing theproductivityof specific“sectors”,“clusters”,or“valuechains”.Theparticularobjectivesoftheseinitiativesvary.Insomecases

theymayseek toprovideprotectionsagainstforeigncompetition, inothercasestheylook to increaseexport capabilities, and yet in other cases, they try to develop a new sectors or productive activities.Theyhavebeenimplemented inawidevarietyofways,usingdifferenttypesof instruments, involving

differenttypesofactors,havingdifferent levelsofreachandscope.Similarly, theroleofthestatehasalso varied considerably, ranging from a purely facilitating role of coordination to the provision offinancing, trainings, regulations, and so on. At the ideational level, these initiatives have been

legitimized fromdifferentperspectivesandbodiesof literature in economics,businessadministration,development studies, public administration, and sociology, among others. In fact, competitivenesspoliciesrepresentperhapsthearchetypeofindustrialpolicyasrecommendedbythenewdevelopment

economics consensus. In thenext section Iwill analyze the rise and consolidationof thesepolicies inColombiaduringtheUribeadministration.

In the mid 1990s, the rush for radical neoliberal reforms partially receded due to the opposition ofseveral sectors that had been hit by the liberalization. Within the private sector, among the most

affectedwere theSMEsand the large local firmsoperating in the tradablesector. In thiscontext, theSamper administration,92 aware of the need to promote the adjustment of the country’s productive

structuretocompeteininternationalmarkets,launchedforthefirsttimeaftertheaperturaaninitiativeaimed at increasing the international competitiveness of particular sectors.93 During the 2000s, thispolicyeventuallybecameacornerstoneoftheColombiannewindustrialpolicy.

For the first time inColombia, theSampergovernment included in theNationalDevelopmentPlanof

1994‐1998achapterentitled“CompetitivenessforInternationalization.”Thischapterpavedthewayfora change in policymaking by introducing new institutions and new instruments explicitly designed toincreaseproductivityandcompetitiveness.Themostnotablechangewasbroughtaboutbythecreation

92 Samper, amemberof the Liberalparty,wasMinisterofEconomicDevelopment in theGaviriaadministrationwhereherepresentedthemoderatewingfavoringgradual,ratherthanradical,reforms.93Previously,actually,theGaviriaadministrationcontractedtheinternationalconsultingfirmMonitor,foundedbyMichaelPorterandotherHarvardfaculty,tocarryoutsevensector‐level“competitivenessstudies”.Thoughthesestudiesdidnot lead to significantaction, their conceptof competitivenessbasedonproductive chainsbegan tocirculateamongColombianpolicymakers.

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of aNational Council for Competitiveness (NCC) in 1994,94 an advisory council to the President on allmatters related to “quality, productivity and competitiveness improvement for the country and its

regions.”Originally,theNCCincludedsevenrepresentativesoftheprivatesector,threerepresentativesoftheacademia,andthreerepresentativesoftheworkforce,allappointedbythePresident.AspartofthedecisionsoftheNCC,thegovernmenteventuallynegotiated11“CompetitivenessAgreements”with

selected sectors, “production chains”, whereby involved parties committed to particular actions forcompetitivenessimprovement.95Whilesomeoftheseagreementswereorientedtowardsrestructuringin response to the distresses resulting from increased import competition, others were aimed at the

development of export capabilities. Most of the agreements contained concrete action plans, withgovernment commitments in areas of regulation, trade policies, financial support and infrastructure,andprivatesectorcommitmentstocertainproductivityorexportgoals.

Fromtheearly1990suntil themid2000s, competitiveness policies inColombiawent throughseveral

internal reform processes and restructurings. Some of themajor effortswere the National Policy forProductivity and Competitiveness 1999‐2009 and the Colombia Competes Network as well as theInternalAgendaforProductivityandCompetitivenesswhichwasbuiltasaresponsetothelaunchofthe

FTA negotiationswith the United States96. Ultimately, the amendments and uncoordinated initiativesnever really tookoff andundermined thepossibilities of consolidating theprocess.97 It suffered fromweak and disorganized institutional structures, overlapping tasks, lack of strategic view, poor

coordination, weak execution, and absence of monitoring mechanisms or evaluation of results. Still,despite all the deficiencies, the different initiatives set the foundations for a new industrial policy forColombia.Overtimethecompetitivenessagenda,inspiredintheideasofMichaelPorter,98managedto

gainitsownplacewithintheColombiandevelopmentstrategyaswellasineconomicpolicymakinganddiscourse.Indeed,sincethe1990severyNationalDevelopmentPlanhasunderscoredtheimportanceof

enhancing competitiveness and productivity for economic growth and devoted specific chapters orsectionstothecompetitivenesspolicy.Althoughnotexplicitlyframedasan“industrialpolicy”,atermatoddswith theprevailingneoliberal ideas, thecompetitivenesspolicyeventuallybecame in factoneof

themajorColombianindustrialpoliciesofthelastdecade.99

Indeed, after a series of failed initiatives, in 2006 the Uribe’s government finallymanaged to build acoherent institutional setting for competitiveness policymaking by creating a National System forCompetitiveness and placing competitiveness policies at the center of the economic development

94Decree201095 Marcela Eslava and Marcela Melendez, ‘Politics, Policies and the Dynamics of Aggregate Productivity inColombia’(2009)IDBWorkingPaperSeries10196CONPES3297“AgendaInternaparalaProductividadylaCompetitividad:Metodología”(2004)97 See, Marcela Eslava and Marcela Melendez, supra note 95, at 26, and Maria Piedad Velasco, “Politicas deProductividad y Competitividad en Colombia 1998‐2002”, UN Economic Commission for Latin America and theCaribbean,SantiagodeChile,2003.98See,supranote93.Seealso,MichaelPorter,TheCompetitiveAdvantageofNations(NewYork:TheFreePress,1990)99Wilson Peres, ‘TheSlowComebackof IndustrialPolicies in LatinAmericaand the Caribbean’ (2006)88CepalReview 67;Wilson Peres and Annalisa Primi, ‘Theory and Practice of Industrial Policy: Evidence from the LatinAmericanExperience’(2009)CEPALSerieDesarrolloProductivo187.

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strategy.For thispurpose, theUribeadministration initially requestedan international consulting firmtoprovidea fullassessmentofcompetitivenesspoliciesandprocesses for theperiod1998‐2006;asa

resultofwhichastudyhighlightedthemajorweaknessesintheoverallinstitutionalstructure.100Italsoconcluded that themajor process drawbackswereweak execution togetherwithweakmonitoring ofactions and commitments, and inadequate impact evaluation.101 Consequently, the government

reorganizedtheinstitutionalsetupandredefinedthestrategywiththepurposeofgivingcoherencetotheinstitutionalsettingofproductivityandcompetitivenesspolicymaking.Aspartofthiseffort,in2008theCONPESapprovedtheorganizationofaNationalSystemforCompetitiveness(NSC)understoodas

thesetof“guidelines,regulations,resources,programsandpublicandprivateinstitutionsthatforeseeandpromote thedesign and adoptionof a policy for productivity and competitiveness.”102 Today theinstitutionalstructureisaunifiedstructure,coordinatedbyaNationalCommissionforCompetitiveness

(CNC)whichismadeupofabalancedrepresentationofpublicandprivatekeyinterests,withapublic‐private operational executive committee, a governmental operational committee and a public‐privatetechnicalsecretariat.

The rationale behind the new “Competitiveness and Productivity Strategy” is that firms and sectors’

competitiveness iskeyfor thecountry’sproductivityandgrowth.According tothisview, thestatehasfundamentally a facilitating role providing both general and sector‐specific public goods, and public‐privatealliancesareneededtoidentifyandsupportsuccessful“bets”,emergingclustersandindustries,

solve coordination problems, and overcome bottlenecks. The CONPES document on competitivenesshighlights that the competitiveness agenda should be based on productivity increases and not onreduction of labor costs or rent‐ seeking activities, and productivity increases should come mostly

throughthedevelopmentofnewproductsandexports,asconcludesthestudypreparedbyHausmannandKlingerwhichdeeplyinfluencedthenewcompetitivenesssystem.103

Anotherideathatisthatattheheartofthecompetitivenesspolicyisthatpublic‐privatecollaborationis

crucial for successful development. This is an idea that scholars such as Rodrik and Hausmann havestrongly advanced in contemporary literature on development economics.104 According to them,

100 Among the major deficiencies, the study stressed the following: a) duplication of efforts and consultationactivities;b)alowlevelofactivityontransversalandprocessissues;c)excessivelyinformallinkswithkeydecisionmakingbodies;andd)weakparticipationbyentrepreneurs,particularlySMES(privatesectorrepresentationwasmostlycarriedonthroughbusinessassociationstaff),aswellasbyseveralkeyagencies.101 The study included a survey of participants which highlighted the capabilities and commitment of somegovernment agencies, especially NDP and the Ministry of Trade and its agencies, a few departments andmunicipalities,andprivatesectororganizations.Instead,civilsocietyorganizations,academicrepresentatives,theministry of Agriculture and its agencies andmost departmental andmunicipal agencies received low scores oncapabilitiesandcommitment.102CONPES3527(2009).103See,HausmannR.andKlingerB.(2008)‘AchievingExport‐LedGrowthinColombia"CIDWorkingPaperNo.182;RicardoHausmannandBaileyKlinger, ‘StructuralTransformationandPatternsofComparativeAdvantage in theProductSpace’(2006)HarvardUniversityCenterforInternationalDevelopmentWorkingPaper128.104 Ricardo Hausmann and Dani Rodrik, ‘Economic Development as Self‐Discovery’ (2003) 72 Journal ofDevelopment Economics 603. Ricardo Hausmann and Dani Rodrik, ‘Doomed to Choose: Industrial Policy asPredicament’ (2006)HarvardUniversity Center for International DevelopmentWorking Paper, September 2006;

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industrial policy is about getting the institutional setting right, and in this sense, public‐privatecollaborationmechanisms have higher chances of making better decisions and avoiding both market

and government failures. While the Colombian private sector participated in the design andimplementationofcompetitivenesspolicies fromthebeginning, its key role inthesystemwas furtherreinforced in2007with thecreationofa Private Council for Competitiveness (PCC).ThePCC includes

businessassociationsandaselectedsetof largefirms,bothnationalandforeign,aswellas influentialbusinessmen. This council closely resembles to the US Competitiveness Council and has had formerChiefEconomistoftheInter‐AmericanDevelopmentBankandHarvardProfessorRicardoHausmannas

itsmainadvisor.Under thenewcompetitiveness system, thePCChasa leading voice. It gaineda keyand privileged position as a member of the Technical Secretariat to the NCC, together with theDepartmentofNationalPlanning,whichisinchargeofpreparingthepolicydocumentsfordiscussionat

theNCC.Inaddition,thepresidentandvicepresidentoftheConsejoGremialNacional—thepresidentsof ANDI and Sociedad de Agricultores de Colombia, respectively—have seats on the CompetitivenessCouncil’sboardofdirectors.The existenceof these formalmechanismsofparticipation,however,has

notpreventedprivatesectorrepresentativesfromusingalternative,lessformalvenuesofparticipationinpolicymakingandlobbying.105

Another distinguishing feature of the Colombian competitiveness system is the key role played byinternational actors and ideas. It is clear that in the building and consolidation of the Colombian

competitiveness system, the influence of external advisors, from Porter to Hausmann, as well asinternationalinstitutionssuchastheWorldEconomicForum,WorldBank,Inter‐AmericanDevelopmentBank,AndeanDevelopmentCorporation,andtheUSAIDhasbeensignificant.106Partlyasaresultofthis

exposure to international influences, as in the case of FDI policies, the marketing efforts orientedtowards the international audience have been a key component of the competitiveness policy. The

Uribe administration took particular measures to show that Colombia complies with “internationalstandards”andglobal“bestpractices”.Thus,forexample,thePCCandCONPESadoptedasexplicitgoalsthe improvementofColombia’s score in theWEFCompetitiveness Indexesand theWorldBankDoing

BusinessReports.Moreover,theMinistryofForeignTradeassignedofficialsresponsibleforeachsetofindicators,with theresponsibilityofpromotingagreementsamong therelevantgovernmentunitsand

DaniRodrik,‘DevelopmentStrategiesforthe21stCentury’(2001)AnnualWorldBankConferenceonDevelopmentEconomics,Fall2001.105Infact,inrecenttimesthelatterareperceivedasmoreeffectiveandseempreferredbyprivateproducersfordiscussing thepolicy issues they considermostpressing. Rodrigo Losada, supranote60,presents evidence thatthesedirect contactsare the instrument thatbusinessassociationsusemost frequently to influencepolicy. Inasurveyofheadsofbusinessassociations,hefindsthatalmostallofthem(93percent)establishdirectcontactwithcongressmenandgovernmentofficialstopresentthesector’spointofview.Interestingly,thisoccursdespitethefactthat91percentofthoseassociationsreportbeingabletoparticipateinformalconsultativebodiescreatedbythegovernment.MarcelaEslavaandMarcelaMelendez,supranote95.106Inthelastyears,theCEPALhasregainedsomeofitsinfluenceonLatinAmericaneconomicpolicycirclesandithas advocated for the adoption of new industrial policies. See, Bernardo Kosacoff and Adrian Ramos, ‘Theindustrialpolicydebate’(1999)68CepalReview35;WilsonPeres,supranote123;andWilsonPeresandAnnalisaPrimi,supranote123.However,inthecaseofColombia’scompetitivenesspolicies,theroleoftheCEPALhasbeenlessrelevant.

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monitoring their implementation. Not surprisingly, Colombia was selected twice in a row as “majorreformer”accordingtotheDoingBusinessindicators.107

One of the leading initiatives of the national system of competitiveness is the Program for the

Transformation of Production (PTP), within the Ministry of Foreign Trade, which has the goal ofdeveloping “World Class Sectors”.108 This program is the crystallization of a long series of efforts inColombia to develop sector‐specific policies aimed at strengthening particular sectors with export

potentialinanincreasinglycompetitiveglobalenvironment.Theremainingofthissectionwillfocusonthreedimensionsofthisprogram:theselectionprocessofsectors,thebenefitsfortheselectedsectors,andtheorganizationmechanisms.

Since the1980s, in thediscourseofpolicymaking circlesandneoclassical economics texts, the ideaof

“picking winners” has been closely associated with the most negative aspects of the ISI model. Theimpact of this ideahas been such in economics thatmany “neo‐developmental” scholars try hard tobuildargumentstodiscriminateamongsectorsforstatesupport,andatthesametime,distinguishingit

from“pickingwinners”.109TheUribegovernmentcarefullypresentedtheprograminawaythatwouldnot fall into the supposed contradiction between “believing in the market”, horizontal policies andimpartiality, and at the same time choosing specific sectors for favored treatment and introducing

“distortions”intothemarket.Inordertoovercomethisapparentdifficultyoflegitimizingsector‐specificpolicies inapro‐market government, the PTPhasstronglyemphasized theobjectiveand independentevaluationbasedontechnical,impartialandtransparentmethodologiesto,ultimately,“pickwinners”.

ThePTPwasofficially launchedinlate2008andatthattimetheMinistryofForeignTradeemphasized

inthepresentationthemarkeddifferencesvis‐à‐vistraditionalindustrialpolicies,speciallythefactthatthePTPisa“competitiveprogram”,withoutthe“arbitrary”selectionofwinners.110This issupposedto

be so as eventually the benefits of participating in the program could be granted to any sector thatpresentsasound“valueproposal”andbecausenosubsidiesordifferentialtariffsortaxesareofferedtothechosensectors.

Nevertheless,thewayinwhichthegovernmentactuallyselectedthebenefitedsectorswastheresultof

an accumulationof different processes andmethods,which certainly did not necessarily rule out thepossibilityofan“arbitrary”selection.BytheendofUribe’smandate,Colombiahadimplementedthreeroundsofselection. Inthefirstround,theMinistryofForeignTrade,with theadviceoftheconsulting

107 Such a strong drive towards achieving improvements in these external indicators stimulates activism andcomplianceandfacilitatesmonitoringandevaluation,butithasalsocreatedabiastowardsactionswithpositiveimpactonthe indicatorsbutmaynotyieldactualbenefits.AsnotedbyMarcelaMelendezandGuillermoPerry,supra note 36, there is no way to know the actual benefits on total‐factor‐productivity increases of a givenimprovement inoneoranotherofthe individualWEForCDBindexes.Fora legalcritiqueofsomeoftheseveralshortcomings of the Doing Business Report, see Alvaro Santos, ‘Labor Flexibility, Legal Reform and EconomicDevelopment’(2009)50VirginiaJournalofInternationalLaw43.108CONPES3678“PolíticadeTransformaciónProductiva:UnmodelodedesarrollosectorialparaColombia”(2010),andpreviously,CONPES3484“PolíticaNacionalpara laTransformaciónProductivay laPromociónde lasMicro,PequeñasyMedianasEmpresas:UnEsfuerzoPúblico‐Privado”(2007).109See,forexample,DaniRodrik,“TheReturnofIndustrialPolicy”,ProjectSyndicate,December04,2010.110AnnouncementmadebyMinisterofTradeGuillermoPlataonOctober1,2008.

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firm McKinsey, unilaterally identified a set of potential world‐class sectors for Colombia through amethodology thatcontrasted globalopportunitieswithColombian relative“strengths” (understoodas

sectors with strong local development and/ or potential for growth, significant actual exportperformanceandcompetitiveadvantages)and“weaknesses”.111Thisfirstpoolofsectorsemergedfroma host of previous studies which were hired by the government during the 2000s.112 A preliminary

subgroup of emerging sectors with strong export growth potential was identified for which a moredetailedanalysisofpotentialmarketsandentrybarrierswasthenundertaken.Accordingly,ashort listofsevensectorswasselected.113Afteran“open”calltothesesectorsfor“sector‐levelvalueproposals,”

to which six sectors responded, the “best” two were selected: business process outsourcing andsoftware and IT services. The selection was made by a jury composed by both public and privateinstitutions.114 As a result, detailed “business plans”115 were elaborated for these sectors, with funds

provided by the Ministry of Foreign Trade and the technical support of McKinsey. Later on, from asecond call for sector‐level value proposals two additional emerging export growth sectors wereselected: health tourism and cosmetics, for which business plans were produced following the same

methodology.

While the first round seems to have responded to technical considerations, in line with the neweconomic development consensuswhich emphasizes the importance of selecting sectors intensive intechnology, with strong export potential, and so on, the second round appears to have responded

rathertoreasonsofdomesticpoliticaleconomy. In thesecondroundtheUribe’sgovernmentmadeasimilarcallforproposalsbutthistimethepoolofsectorsaddressedwasmadeof“mature”sectorswithexport growth potential. Thus, following a similar methodology, 11 mature sectors “with export

potentialthroughinnovationanddevelopmentofnewproducts”wereinvitedthroughtheirrespectivebusinessassociationstopresent“sectorvalueproposals.”116Sevenofthesesectorspresentedproposals

andfourwereselected:graphicindustries,autoparts,textiles,andelectricenergy.Inthecaseofthesematuresectors, theMinistryfinancedonlyhalfofthecostoftheelaborationofthebusinessplan,theother half being financedby the respective business association. Unlike the first call, which seems to

have been a “bet” on future winners, an attempt to experiment, trying to develop new productive111See,McKinseyGlobalInstitute,HowtoCompeteandGrow:ASectorGuidetoPolicy(2010).112 Porter, Hausmann and Klinger, IDA, DomesticAgenda, Araujo Ibarra, AT Kearney,Universidad del Valle, andColciencias.113Businessprocessoutsourcing,softwareandITservices,healthtourism,cosmetics,householdappliances,autopartsandpharmaceuticals114 In the first call, the jury was composed by the Department of National Planning, the Private Council forCompetitiveness,President’sHighCouncilonCompetitivenessandRegions,Proexport,andBancoldex.115 The “Business Plans” are based on a detailed identification and projection of global and regional marketopportunities, benchmarking of Colombian strengths and weaknesses vis‐à‐vis potential competitors,establishmentofgoalsandanactionplans.Totakeanexample,31requiredaction initiativeswereidentifiedforthe business process outsourcing sector, of which 12 were related to skill upgrading, 9 to the regulatoryframework,8toindustrymaturing,and2toinfrastructureimprovements.ItisestimatedthattheimplementationofthisplanmaygeneratearoundUS$1.4billioninadditionalexports(outofUS$3.3billioninadditionaltotalsales)and78,000newjobsby2012.116Graphic industries,energypower,siderurgyandmetalmechanics, jewelry,textilesandapparel, footwearandleather products, petrochemicals and plastics, fertilizers and pesticides, auto parts, biotechnology, and healthservices.

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capacitiesasinthebesttraditionoftheISImodel,thesecondcallmaybeseenratheras“savinglosers”fromthepast,labor‐intensiveandpoliticallysensitivesectors,insomecases“rent‐seekers”builtduring

theISIperiod,whicharestrugglingtosurviveinmorecompetitivemarkets.

Finally,attheveryendofUribe’smandate,athirdcallwas launched.Thistime itwas targeted tothesectorswhereColombiapresentstraditional“natural”comparativeadvantages.JointlywiththeMinistryofAgriculture,thePTPcalledforproposals inagriculturalandagro‐industrialsectorsandthefollowing

four sectors were selected: cacao, chocolate and confectionery, bovine cattle, palm oil, and shrimpindustry.117Hereagain,inacountrywithastrongandlargeagriculturesector,itseemsthatthedecisionto extend the benefits of the program to the agriculture sector responded to political economy

consideration,supportedbyeconomic ideasthattendtorelymoreonnaturalcomparativeadvantagesandmarketsignals.

As a result, the PTP initially arose as a governmental program that resembled the ethos of the ISIindustrialpolicies:theselectionofasmallnumberofsectorswithstrongdevelopmentaleffects,making

abetonthefutureandseekingatransformationof theproductionstructure.However,over timethegovernment was forced to incorporate traditional sectors that did not necessarily respond to theoriginal idea. The inclusion of traditional sectors, though, can be interpreted as a move that the

government made to politically legitimize a program that inevitably discriminates among sectors tograntstate’sassistance.AprobablyunintendedoutcomeofthishasbeenthatthePTPgraduallyturnedintoagovernmentalprogramwithamore“horizontal”approachseekingtoraisethecompetitivenessof

different sectors across the economy. Even so, the program still retained a selection process with aprioritizationofsectorsaccordingtomoreorlesstechnicalcriteria.However,asseenabove,theamplemargins of discretion that the government had to define the targeted pool of sectors for a call of

proposalscouldhaveeasilyunderminedanyattempttomaintainapurelytechnicalselectionprocess.

Beyondthefeaturesoftheselectionmechanism,thePTPpresentstwoadditionalmajorshortcomings.Thefirstonereferstotheinstrumentsusedandbenefitsprovidedbytheprogram,andthesecondone

relates to the lack of enforcement mechanisms. Regarding the former, one of the major tangiblebenefitsprovidedbytheprogramistheelaborationofabusinessplan,subsidizedbythegovernment,which counts with the technical support of a recognized international consulting firm, i.e., cheaper

know‐how.Anothermajor benefit fromparticipating in theprogram is the active involvement of thegovernment to facilitate coordination and overcome bottlenecks among the different actors of thechosen sector, including firms in the production chain, business associations, governmental agencies,

and so on. However, while these instruments are certainly useful, the PTP lacks traditional “hard”instruments, such as explicit protections, tax incentives or subsidies,which inmany casesmaybe farmore effective to bolster the development of a sector. The lack of hardmechanisms seems to have

responded to at least two factors. On the one hand, there is an ideological component. Shallowinterventionsandlimitingtheroleofthegovernmenttoapurelycoordinationfunctionisinlinewiththemostconservativepositionsinthenewdevelopmenteconomicsconsensus. Itfitsbestinthediscourse

and ideological orientation of Uribe government and it somehow reduces the contradictory image

117Unlikeintheprevioustwocalls,theconsultingfirmhiredbythegovernmentwasA.T.Kearney.

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arising from a “neoliberal” government having an industrial policy that picks winners. On the otherhand, thereseems tohavebeenalsopractical reasons.ThePTPwas launched in themidstof theUS

economic crisis in 2008 which severely affected the resources of the Colombian government and itscapacitytoprovidefinancialbenefits.118

The absence of hardmechanismswithin the PTP, however, does notmean that they do not exist inpractice. Infact,somefirmsoperating insectorsselectedbytheprogramalsobenefitfromthespecial

regimes of FTZs, LSCs or sector‐specific incentives. Thismaybeproblematic for at least two reasons.First, itunderminestheeffectivenessoftheprogram,orthecompetitivenesspolicyat large,giventhelackofcoordinationbetweenthedifferentpoliciesandinstrumentswithinandoutsidethePTP.Second,

itmakeslessclearandtransparenttheidentificationoftheactualbeneficiariesofthecompetitivenesspolicies;i.e.,itobscuresthepoliticalchoicesbehindtheindustrialpolicy.

Finally, thesecond important shortcomingof thePTP is the lackofhard“performance requirements”andthelackofenforcementmechanisms.Inpartduetotheabsenceofhardincentivesprovidedbythe

government, in turn theprivate sector does notmake costly or deep commitments either. Still, evenwhen it does, and although theprogram countswith effectivemonitoringmechanisms, there are noeffectivesanctionsincaseofnon‐compliancebytheactorsinvolved.119Inthisway,thePTPrepeatsonce

again,oneofthemajordeficienciesthatcharacterizedtheISIpoliciesinLatinAmerica,incontrasttoitsSouth East Asian counterparts, i.e. the absence of both effective performance requirements andsanctions.120

6.ThePoliticalEconomyofIndustrialDevelopmentInordertobetterunderstandthechangesandcontinuitiesofindustrialpoliciesinColombiaitiskeyto

takeintoaccountthepoliticaleconomybehindthem.InthecaseofColombia,thestatehastraditionallyhad very close ties, almost symbiotically,with the local private business sector. Also, the influenceofinternational experts and institutions cannot be underestimated. Therefore, the next sections will

analyzethetransformationsoftheindustrialbusinesssector inColombia inthelastdecadesaswellasthechangingroleofinternationalactors.Thesectionconcludeswithananalysisofthereconfiguration

experiencedintheColombianprivatesector in the lastdecades,asaresultof theaccumulationof ISIandneoliberalpolicies,whichinturnssustainstodaythecurrentdevelopmentstrategy.

118However,thegovernmentcouldhavetakenadifferentapproachasBrazildidbyanexpansionofcreditthroughtheBrazilianDevelopmentBank(BNDES).119Theabsenceofsanctionmechanismsandeffectiveincentivesmayleadtothesomehowawkwardsituation inwhich the Colombian governmentmay identify a strategic sector, with great potential for growth and positiveexternalities for the country’sdevelopment,butdue to the lackofappropriatepolicy instruments, thebusinessplanmaynotbesuccessfullycarriedout,andthewholesectormaydeclineduetoresponsibilityornegligenceofspecificfirmsorparticularactors.120 Alice Amsden, The Rise of "The Rest": Challenges to theWest From Late‐Industrializing Economies (Oxford:OxfordUniversityPress,2001).

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PoliticsofIndustrialization:TheRiseoftheIndustrialists“AhoratodoelgobiernoestádominadoporlaANDI”,saidJorgeEliecerGaitan.121Afewmonthslater,onApril 9 of 1948, Gaitan was assassinated and theBogotazo, a violent popular riot, broke out.122 ThisscenecondensesinanutshellthepoliticalcontextinwhichtheindustrializationprocessinColombiawas

born and marked its subsequent evolution. It portrays a Colombian state highly influenced by theindustrialist interests,theexclusionofopposingvoices,andaconcomitantviolence.TheaftershockofGaitan'smurder initiatedadecadeofopenviolence,knownasLaViolencia, fueledby thestrugglefor

powerbetweentheConservativeandLiberalparties,andamongtherisingworkingclass,thetraditionalcoffeeexportingproducers,andtheemergingindustrialbourgeoisie.

IntheaftermathofLaViolencia,however,itbeganaperiodofhighpoliticalstabilitywhichallowedfor

thefulldevelopmentoftheISImodel inColombia.In1958,apowersharingagreementheadedbythetwomajorpoliticalparties,theLiberalandtheConservativeparties,togetherwiththestrongsupportoftheeconomicandpoliticalelites,createdanarrowlybasedpoliticalarrangementknownastheFrente

Nacional;123 a coalition formed to prevent both a relapse into La Violencia as well as the return of

121 “Now the whole government is dominated by the ANDI” (ANDI: Asociacion Nacional de Industriales, theNational Association of Industrialists). Discourse pronounced by Jorge Eliecer Gaitan onDecember 10, 1947.ElTiempo,December11,1947.122 The riot that followed Gaitan’s assassination left over 4,000 dead and thousands injured, with much ofdowntownBogotádestroyed.The impactoftheBogotazowas suchthat ithadrepercussionsbeyondColombia,fomentingupsurges inother countriesof LatinAmerica. Inthe late1940s,Gaitanhadbecomethe leaderoftheLiberal Partyand themostprominentpolitician in the country. Seenasa threatbyboth theConservativesandtraditionalLiberalelites,aswellasthemajorproducerassociations,Gaitancountedwithmassivesupportamongthecountry'sworkingclass,coffeegrowers,andsmallbusinessmen. In1948,atthetimeofhisassassination,hewas seenas the candidatemost likely towin thepresidential elections.SeeEduardoSaenzRovner, LaOfensivaEmpresarial: Industriales, Politicos y Violencia en los Años 40 en Colombia (Bogota: TercerMundo – Uniandes,1992)andPaulOquist,Violence,ConflictandPoliticsinColombia(NewYork:AcademiaPress,1980).123Thepoliticalpact,eventuallyendorsedbyanationalplebiscite,requiredbothpoliticalpartiestoshareequallyall executive, legislative, and judicial posts, and stipulated that for sixteen years (from 1958 to 1974) thepresidencywouldalternate,exclusively,betweenmembersofthetwoparties. Inaddition,mostmeasureswouldrequire a two‐thirds congressional vote for approval, making thus radical changes highly improbable. TheConstitutionalreformof1968extendedtheprincipleofbureaucraticparityfrom1974to1978,andrequiredthepresidenttoextendincabinetposts“adequateandequitable”representationtothemajorpartynotholdingthepresidency, a practice which was maintained by most presidents until the 1990s. As a consequence of theguaranteedrotationofthepresidencyduringtheFrenteNacional,theelectoratewasprogressivelyalienatedasitsvote had been rendered largelymeaningless. See, Jonathan Hartlyn,The Politics of Coalition Rule in Colombia(Cambridge: Cambridge University Press, 1988). Arend Lijphart,Democracy in Plural Societies (NewHaven: YaleUniversity Press,1977); Robert Dix, ‘ConsociationalDemocracy: TheCaseofColombia’, (1980)303ComparativePolitics12; JonathanHartlyn,ThePolitics ofCoalitionRule in Colombia (Cambridge:CambridgeUniversityPress,1988);AlexanderWilde,‘ConversationsamongGentlemen:OligarchicalDemocracy inColombia’,inJuanLinzandAlfred Stepan, eds., The breakdown of democratic regimes: Latin America (Baltimore and London: The John'sHopkins University Press, 1978). Unlike most countries in the region, Colombia managed since 1958 to avoidformalmilitaryruleandpersistentpoliticalinstabilitywhilebeinggovernedbyacivilianpoliticalregime.Still, itisremarkable that nearly 75 percent of the National Front period was conducted under the state of siege. SeeGustavo Gallon Giraldo,Quince anos de estado de sitio en Colombia, 1958‐1978 (Bogota: Editorial de AmericaLatina,1979).AnaMaríaBejaranoandEduardoPizarro LeonGómez, ‘Fromrestricted tobesieged: the changingnature of the limits to democracy in Colombia’ (2002) The Hellen Kellogg Institute for International Studies,WorkingPaper#296.

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populist leaders which may mean a threat to the traditional elites.124 If, as Kennedy suggests, it isdifficult to interpretthe“politics”ofdevelopmentwithconfidenceas,during the ISIperiod,right, left,

andcenterregimessharedthedominantmodeofdevelopmentthinking,125inthecaseofColombiathetaskisevenharder.DuringtheFrenteNacional,whiledifferenceinstyleandconstituenciesbetweentheLiberalandConservativepartiesremained,theperiodpresentedhighlevelsofconsensus,homogeneity

andcontinuityinsubstantivepolicies.Ontheothersideofthecoin,thismonopolizedpoliticalscenariodid not provide the working classes and peasantry an institutionalized channel for advancing theirinterest.126Sincethe1960s,therefore,thepoliticsofeconomicdevelopmentinColombiaevolvedinan

environment inwhich thelabormovementplayedlargelyasecondaryroleandtheonlyreal threattotheISImodelwasrepresentedbytheguerrillas.127

WhilelaborforceswererelegatedintheconstructionoftheISImodel,thebusinessassociations,knownin Colombia asgremios, instead, played amajor role in policymaking.128 Indeed, a restrictive political

systeminColombiadidnotmeananinsulatedorautonomousstate.AmongtheColombiangremios,theNational Association of Industrialists (Asociacion Nacional de Industriales, ANDI) in particular, stood

124Withthesupportofthetraditionalelitesandbusinessassociations,in1953RojasPinillaseizedpowerthroughacoupd’etatwiththegoalofputtinganeffectiveendtotheViolencia.ThefollowingyearhewaselectedPresidentofColombia.Hisadministrationwas characterizedby strong state interventionandpublicworks inparallelwiththe experience of Peron in Argentina and Getulio Vargas in Brazil. In this period, Colombia experienced anoutstanding industrialgrowth.However,overtimeRojasPinillalostthesupportofthelargestproducersandtheConservativeandLiberalparties’eliteswhosawhisincreasingly“populist”policiesasathreattotheirpowerandinterests.125See,Kennedy,supranote126 Gaitan, one of the leaders of the Liberal party, had represented probably the most important attempt tocanalizethelabormovementthroughthepoliticalsystem.Lateron,in1964RojasPinillacreatedthepartyAlianzaNacional Popular (National popular Alliance) (ANAPO) which could have emerged as a vehicle for the workingclasses. However, in 1970, when the party had become a powerful force and likely winner, the presidentialelections were tainted by fraud and the traditional parties retained power. As a reaction, several member ofANAPOdisillusionedwiththeelectoralsystemfoundedtheguerrillamovementM‐19,anamechoseninallusiontothedateofthepresidentialelectionsof1970.127TheendoftheLaViolenciadidnotmeantheendofactualconflictandviolenceinColombia.Onthecontrary,as it iswell known, it continued,albeitunderadifferent formsand rationales: the guerrillawarfare. During the1960s,thefirstmajorguerrillaorganizationsofColombiawerecreated:theEjércitodeLiberaciónNacional(ELN,in1964),theFuerzasArmadasRevolucionariasdeColombia (FARC, in1964),andtheEjércitoPopulardeLiberación(EPL, in 1967). Later, in the 1970s, new guerrilla movements arose: Movimiento 19 de abril (M‐19), in 1970;Autodefensa Obrera (ADO), in 1976. In the 1980s, Partido Revolucionario de los Trabajadores (PRT), in 1982;MovimientoManuelQuintínLame,in1984;EjércitoPopularRevolucionario(EPR),in1985;FrenteRicardoFranco,in1986.Andintheearly1990s,theCorrientedeRenovaciónSocialista(CRS),in1991.128 Ben Ross Schneider, Business Politics and the State in 20th Century Latin America (Cambridge: CambridgeUniversityPress,2004). Schneiderpointsout thatColombia representsperhaps thecaseofbestorganizationofbusinessinterestsinLatinAmerica.Itwouldbeamistake,though,toseetheColombianstateasmerelycapturedbybusiness interests. Instead,therelationshiphasbeenratherofatwo‐waytype.Infact,thestateplayedakeyrole in the creation and development of themajor business associations during the first half of the twentiethcentury.Successivegovernmentshelpedtoorganizebusinessinterestsasameansofsupportingthedevelopmentof strategic sectorsanddelegating somepolicy responsibilities toentities thatwere considered tohavegreatertechnical capabilities. SeeRosemaryThorpandFranciscoDurand, ‘AHistoricalViewof Business‐State Relations:Colombia,Peru,andVenezuelaCompared’,inSylviaMaxfieldandBenRossSchneider,eds.,BusinessandtheStateinDevelopingCountries(Ithaca:CornellUniversityPress,1997).

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out.129 It was created in Medellin by the major industrial firms in 1944 under the auspices of thegovernment,130andsincethenithasplayedaprotagonistroleinthepoliticaleconomyofdevelopment

ofColombia.131Noteworthy,during its“GoldenAge” (1948‐1970)and throughout theFrenteNacionalperiod,prominentmembersoftheANDIandothermajorbusinessassociationshaddirectparticipationingovernmentpositionsandCongressseats,allowingindustrialistsandbusinessclasstohaveastrong

influenceonthedesignoftheISIprojectinColombia.132

At the same time industrialists were gaining power, getting access to key state decision makingpositions, and the political system remained restrictive, the important participation of internationalexperts rendered the ISI model less contestable and helped to portray an image of depoliticized

economicpolicymaking.Throughdifferentinternationalchannels,Colombiahadahighlevelofexposuretotheideasofsomeoftheleadingdevelopmentscholarsandpolicymakersofthetime.Justifiedbytheidea that Colombia suffered from a deficit in professionalized personnel and technical expertise, the

planningorganizationsof thecountrywereoftenadvisedbyforeignexperts.133Tomentionjustafew,

129With the only exceptions of the agricultural, coffee and banking associations,most producerassociations inColombiawereformedinthe1940s.Nosingleumbrellaassociationhasrepresentedtheprivatesectorasawholein Colombia. The closest approximation is the ANDI, which includes not only allmajor industrial firms but alsoimportant firms inagro‐business, finance, insurance,andcommercialdistribution. Thus, it is common formajorfirmstobemembersofbothmorespecializedproducerassociationsandANDI.130Partly, theANDIwascreatedasa responsetoPresident Lopez’s (1934‐1938and1942‐1945)requesttohaveonesinglespokesmanforindustry.See,MiguelUrrutia,Gremios,PoliticaEconomicayDemocracia(Bogota:FondoCulturalCafetero,1983).131ThekeyroleofbusinessassociationsandtheANDIinparticularinColombia’seconomiclifeisoutstanding.Foradetailedaccount, seeNicanorRestrepoSantamaria, “Transformacióne Influenciade lasAsociacionesPatronalesdeAntioquiasobrelasPolíticasEconómicasySocialesColombianasapartirde1940”(PhDdiss.,EcoleDesHautesEtudesEnSciencesSociales,2009).RestrepoSantamariawasforseveralyearstheheadoftheGrupoEmpresarialAntioqueno(GEA),oneofthefourbiggestbusinessgroupsinColombia,aprominentmemberofColombianelite,and a key actor in national politics in the last decades. He provides an extensive and detailed analysis of howAntioquian elites effectivelymanaged to have a great influence on Colombia’s economic development policiessince 1940s by occupying leadership positions in major firms, gremios, and the government and Congress.Practically all government ministers in positions important for national economic development have beenpresidentsofbusinessassociationsandtopexecutivesintheprivatesector.132Inhiswork,SaenzRovner,supranote8,showshowsomeAntioquianfirmsandtheANDIhaddirect influenceontheNationalBoardofCustoms,hiredmembersofthepublicadministrationaslobbyists,andmanagedtohavedirectaccesstothemedia.AccordingtoSaenzRovner,LlerasRestrepo(Presidentbetween1966‐1970)washiredtowritearticles inEl Tiempo, themajor Colombiannewspaper, and lobbybefore stateagencies in favorof theindustrial sector. In contrast, organized labor and popular sector organizations have been considerably lessinfluential. JonathanHartlyn, ‘ProducerAssociations, thePoliticalRegime,andPolicy Processes’, (1985)20LatinAmerican Research Review 111. The parallel between the state and private sector was such that during theNationalFrontperiod,manybusinessassociationsmadeeffortstobecomeexplicitlybipartisan.Thiswassotothepointofadjustingthenumericalmakeupoftheirboardstoallowforanevendistributionofmembersfromthetwoparties.“Theremovalofmanyissuesfrompartisandebategaveprivatesectorgroupsamore importantroleas societal intermediaries; in effect business associations provided a “corporative” style of interest articulationbetweenstateandsociety”.See,CarlosE.Juarez,‘TradeandDevelopmentPoliciesinColombia:ExportPromotionandOutwardOrientation,1967‐1992’,(1993)28StudiesinComparativeInternationalDevelopment67,p.73133Since1945,andespeciallysincethemid1960s,therehasbeenanincreasinglytechnocraticorientationofstateplanningeffortsinColombia, leadinggovernmentsto increasinglyrelyontechnicalandbureaucraticapproachtoeconomic development. An economic discourse backed by international institutions helped to consolidate a

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LauchlinCurriewasheadoftheWorldBankmissiontoColombia,thefirstoneofitskindtoadevelopingcountry, in1949,134andafewyears later,heservedaschiefeconomistoftheNationalDepartmentof

Planning(hereinafter“NDP”)(1971‐1981);andAlbertHirschman,aleadingdevelopmentscholar,servedasfinancialadvisortotheNDP(1952‐1954).ColombiawasalsooneofthemainbeneficiariesoftheUSaid initiative “Alliance for Progress”, an international cooperation program envisaged by the United

StatestocontaintheadvanceofcommunisminLatinAmericaaftertheCubanrevolution,whichhadtheinfluential participation of worldwide‐knownWalt Rostow.135 In turn, the venues through which RaulPrebischandtheCEPAL’sthought influencedColombia’seconomicpolicymakingwereseveral.Atelling

exampleisthatLlerasRestrepo,justafewyearsbeforebecomingPresidentofColombiaandleadingthegoldenageof the ISImodel in thecountry,workeddirectlywithPrebischandservedasconsultant toCEPAL.136

PoliticsofEconomicLiberalization:TheBreakupoftheNationalIndustrialistAllianceLikemanyothercountriesintheregion,bythemid1970sColombiabegantointroducesomechangesto

itsdevelopmentstrategy.Shockedby theglobaleconomic instabilityof the time,Colombiaadoptedaseriesofmeasuresthatinvolvedbothgreaterinterventioninsomeareas,likeinthefinancialsector,andless interventioninothers, like in importtariffs.The latter typeofmeasuresmeant thebeginningofatechnocraticapproachtoeconomicpoliciesthroughtheideasandinstrumentsof“planning”,anotionappealingtorationality devoid of politics. The constitutional reform of 1945 gave a legal anchor to the idea of “planning”.However, itsinstitutionalconsolidationrequiredthe internationalboost.ItwasonlyaftertheCurrieMissionthattechnicalorganizations forplanningwere establishedwithin theColombiangovernment. Therefore, in1950 theConsejoNacionaldePlaneación(laterasConsejoNacionaldePolíticaEconómicaySocial(CONPES)andtheComitéde Desarrollo Económico (later as Departmento Nacional de Planeación were established as vehicles for thedevelopmentofNationalPlansforDevelopment(Law19of1958);theMinistryofDevelopmentwascreatedandunitsofplanningwereintroducedwithinseveralministries.Developmentplanningactivitiesduringthe1950swerestillmodestduetothesocialandpoliticalunrestthatdominatedthecountry.However,oncetheNationalFrontwas consolidated, in1966 these institutions regainedpowerandplayedamajor role in economicdevelopmentpolicymaking.As shownbelow, thesedevelopment institutions’weight relative tootherMinistries in thepolicydebate decreased significantly after the neoliberal reforms. See, Arturo Escobar, ‘The Professionalization andInstitutionalization of ‘Development’ in Colombia in the early Post‐World War II Period’ (1989) 9 InternationalJournalofEducationalDevelopment139.134“TheBasisofaDevelopmentProgramforColombia”,thereportofthe“CurrieMission”,wasthefirstofalonglistofplansproducedinColombiaforthefollowingdecades.Inadditionto inauguratingthe“AgeofPlanning”inColombia(1950‐1970),itopenedthedoortotheincreasinginfluenceofinternationalorganizationsandexpertsinthe design of economic policies for development. Colombia received the foreign advice of several institutions:CurrieandHirschmanintheearly195Os;Lebretin1957,1958;Watterson,fromtheWorldBank,in1963‐1964;aHarvardmission, 1960‐1970; CEPALmissions, 1954, 1958‐1962; World Bankmission, 1970; International LaborOrganization Mission, 1970. See, Decsi Arevalo Hernandez, (1997). ‘Misiones Economicas e Internacionales enColombia,1930‐1960’(1997)14RevistaHistoriaCritica7.135AfterholdingkeypositionsintheKennedyadministration,RostowwasappointedbyPresidentJohnsonin1964to be the U.S. Member of the Inter‐American Committee on the Alliance for Progress. Although the initiativeeventually failed for a series of factors, Colombia managed to implement several projects sponsored by theAlliance and with the support of Rostow. Luis Eduardo Fajardo, ‘From The Alliance For Progress To The PlanColombia: A Retrospective Look At U.S. Aid To Colombia’, (2003)Working Paper No. 23, Crisis States Program,DevelopmentResearchCentre,LondonSchoolofEconomicsandPoliticalScience.136CarlosCaballero, ‘La improntadeCarlos Lleras Restrepo en la economía colombianade losaños sesentadelsigloXX’(2009)33RevistadeEstudiosSociales91;EdgarJ.Dosman,RaulPrebisch:Power,PinciplesandtheEthicsofDevelopment(BuenosAires:IDB‐INTAL,2006)

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shiftinthedevelopmentstrategy.ThusColombiasoughttoincreasetheeconomy’sproductivitythroughthe implementation of gradual pro‐market reforms. Although exchange controls remained largely

unaffected, importtariffswerereducedwiththeexplicitgoalof increasingnational industry’s levelsofefficiency. Inaddition,amajorfinancialreformsoughttoderegulatethedomesticmarket,thoughstillkeeping it closed to foreign firms. This trend “towards themarket”, however,was suddenly reversed

duringthe1980swhenthecountrywashithardbytheexternaldebtcrisisintheregion.Goingagainstthetide,andatahighdomesticcost,Colombiadidnotdefaultonitsexternaldebt,andinordertofulfillits obligations, the Colombian government undertook a series of measures aimed at reaching the

necessary surplus. Thus the government reintroduced import controls, increased import tariffs,expandedsubsidizedcredit,stimulatedexports,andimportantly,devaluedthecurrency.137

Once theworstof thecrisiswasovercome,Colombiaembarkedononeof themost radicaleconomictransformations in itshistory,knownastheapertura.138WhileColombiahadtraditionallyhadanopen

position to receive international advice on economicmatters, the desperate need for capital gave anevenupper hand to international financial institutions.139 This time though, the ideological consensusprevailing in these institutions had experienced a significant shift in its approach to economic

development since the early 1980s. Orthodox ideas of Anne Krueger, Stanley Fischer, and LarrySummers,chiefeconomistsoftheWorldBank,informedthenewtrends140andinspiredwhatwouldbeknownasthe“WashingtonConsensus”.141Sincethe1970s,theISImodelhadalreadybeenunderattack

from two very different fronts, dependency studies and neoclassical economics, which fought forprovidinganalternativemodelfordevelopmenttotheregion.142Asitiswellknown,itwasthediagnosisandpolicyrecommendationsofthelatterwhichprevailedandgavetheintellectuallegitimationforthe

forthcoming economic reforms.143 A new generation of neoclassical economists took influential

137 Jose Antonio Ocampo, ‘Crisis and Economic Policy in Colombia, 1980‐5’, in Rosemary Thorp and LaurenceWhitehead, eds., Latin American Debt and the Adjustment Crisis (Basignstoke, Eng: Macmillan/St. Anthony’sCollege,1987).138 It isbeyond the scopeof thispaper toprovidea completeanalysisof thepoliticaleconomyof theaperturaprocessinColombia.Thissectiononlyhighlightsitsmainsalientcharacteristics.FortwocomprehensiveanalysesofthepoliticaleconomyoftheaperturainColombia,seeSebastianEdwards,TheEconomicsandPoliticsofTransitiontoanOpenMarketEconomy:Colombia(Paris:OECDDevelopmentCentre,2001)andMiguelUrrutia,‘Colombia’,inJohn Williamson, ed., The Political Economy of Policy Reform (Washington D.C.: Institute for InternationalEconomics,1994).139Duringthe1980s,whenthefirstreformattemptsstarted,theWorldBankprovidedspecificloans inexchangeof trade liberalization reforms. Once the worst of the crisis was overcome, theWorld Bank pushed for furtherimportliberalizationreforms.140MarthaFinnemore,‘RedefiningDevelopmentattheWorldBank’,inFrederickCooperandRandallPackard,eds.,International Development and the Social Sciences: Essays on the History and Politics of Knowledge (Berkeley:CaliforniaUniversityPress,1997).141Tenparticularreformpoliciesmadeupthe“WashingtonConsensus”:1)fiscaldiscipline,2)publicexpenditurepriorities, 3) tax reform, 4) liberalization of financial markets, 5) competitive exchange rate, 6) liberalization oftrade policy, 7) foreign direct investment, 8) privatization, 9) deregulation, and 10) property rights. See, JohnWilliamson,supranote8.142 Albert O. Hirschman, ‘The Rise and Decline of Development Economics’, in Albert O. Hirschman, Essays inTrespassing:EconomicstoPoliticsandBeyond(Cambridge,CambridgeUniversityPress,1981)143 See, JairoEstradaÁlvarez, ed., Intelectuales, tecnócratas y reformasneoliberalesenAmérica Latina (Bogotá:Universidad Nacional de Colombia and Convenio Andrés Bello‐Colciencias, 2005). Anil Hira, Ideas and economic

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positionsand theChicagoschooldisplaced theCEPALas the “think tank” for economicpolicy in LatinAmerica.144 As part of its development common sense, the Chicago school145 saw that government

intervention, intrinsically inefficient and prone to rent‐seeking, was one of the fundamental reasonsbehindmajorcrisesinLatinAmerica,includingthedebtcrisis.TheythussawtheISImodel,builtontheideaofplanningandstateintervention,asadevelopmentstrategydoomedtofail.146

AlthoughsomeoftheneoliberalreformsbeganduringtheBarcoadministrationinthe1980s,itwasnot

untiltheearly1990sthatthepolicyrecommendationsoftheWashingtonConsensuswerecarriedoutthrough.LedbyPresidentGaviria,fromtheLiberalPartyasLlerasRestrepo,the“father”ofthemodernColombianISImodel,thevarioussetofreformswaspresentedasasinglepackagefacilitatingthus its

political implementation.147 Although therewas natural controversy around the reforms, there was a

policy in Latin America; (Westport: Praeger, 1998);Migual Angel Centeno and Fernando López‐Alves, eds., TheOther Mirror: Grand Theory Through The Lens Of Latin America (Princeton: Princeton University Press, 2001);Veronica Montecinos and John Markoff, eds., Economists in the Americas (Northhampton, MA: Edward ElgarPublishing,2009).144 InaparallelmovewithinColombia,theEconomicsDepartmentoftheUniversityofLosAndeschallengedthedominanceofthethinktankFedesarrollo,traditionallyassociatedwiththedevelopmentofISIpoliciesinColombia.See,FrancoisSerres,‘LasélitesdelaAdministraciónPúblicaenColombia’,inAndrésGómezLeón,ed.,Diálogosdela Economía con Otras Ciencias (Bogotá: Asociación de Economistas de la Universidad Nacional de Colombia,2009).Technocrats,ortechnopols,relativelyisolatedfromtraditionalpressuregroups,playedacrucialroleinthetransitiontoeconomic liberalization.Sincethelate1980s,agroupofeconomists,associatedwiththeeconomicsdepartmentof theUniversityof LosAndes, trained inUnitedstateseanorEuropeanuniversities, associatedwiththeCentralBank,andrelativelyalientothetraditionaleconomicestablishment,hadaseriesofregularmeetingsinwhich they envisaged the economic programof reforms whichwould later be implemented. This group, whichbecame known as the “Club Suizo” group, was led by Rudolf Hommes who later became president Gaviria’sMinisterofFinanceandmastermindoftheeconomicapertura.See,SebastianEdwards,supranote138;EstradaAlvarez, supranote143; JorgeDominguez,ed.,Technopols: FreeingPoliticsandMarkets in LatinAmerica in the1990s(Philadelphia:PennsylvaniaStateUniversityPress,1997)145 See, for example, the works of Gary Becker, ‘A Theory of Competition among Pressure Groups for PoliticalInfluence’ (1983) 98 The Quarterly Journal of Economics 371; and Milton Friedman, Capitalism and Freedom(Chicago:UniversityofChicagoPress,1962).Thenewideasalsoimpregnateddevelopmenteconomics.See,JamesDorn, SteveHanke, andAlanWalters, eds., The Revolution in Development Economics (Washington, D.C.: CatoInstitute, 1998); Jagdish N. Bhagwati and Anne O. Krueger, ‘Exchange Control Liberalization and EconomicDevelopment’ (1973) 63American Economic Review419; Deepak Lal, The Poverty of ‘Development Economics’(London:TheInstituteofEconomicAffairs,1983);RobertBates,ed.,TowardAPoliticalEconomyofDevelopment:ARationalChoicePerspective,(Berkeley:UniversityofCaliforniaPress,1988);RobertLucas,Jr.,‘OntheMechanicsofEconomicDevelopment’ (1988)22 JournalofMonetaryEconomics3; ‘WhyDoesn'tCapital Flow fromRich toPoorCountries’(1990)80AmericanEconomicReview92.Seealso,earlierworksofPeterThomasBauer,EconomicAnalysis and Policy in Underdeveloped Countries (Cambridge: Cambridge University Press, 1957); Ian Little, ACritiqueofWelfareEconomics(London:ClarendonPress,1950).InLatinAmerica,themonetarist ideasofArnoldHarbergerwereparticularly influential. Even theCEPAL thoughtexperiencednotable changesduring the1990s.See,KathrynSikkink,‘DevelopmentIdeasinLatinAmerica:ParadigmShiftandtheEconomicCommissionforLatinAmerica’,inFrederickCooperandRandallPackard,eds.,InternationalDevelopmentandtheSocialSciences:EssaysontheHistoryandPoliticsofKnowledge(Berkeley:CaliforniaUniversityPress,1997).146 GeraldMeier,Biography of a Subject: An Evolution of Development Economics (New York: OxfordUniversityPress,2005).147 President Gaviria was seconded by hisMinister of TreasuryHommes and the director of the NDPArmandoMontenegro. Foracompleteaccountofthereformsasseenbytheprotagonists,seeRudolfHommes,ArmandoMontenegro,andPabloRoda,eds.,Unaaperturahaciael futuro:balanceeconómico1990‐1994 (Bogotá:Tercer

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general consensus among political and social elites. Among policy‐makers aswell as pressure groupstherewas a senseof inevitability basedon thebelief that liberalization andmarket‐oriented reforms

wereapowerfuland“unstoppable”globaltrendwhichColombiahadtojoinsoasnotbe“leftout”.Inaddition, the traditionof power sharing consolidatedduring the National Front period gave room forpoliticsofrelativeconsensus,avoidingthusastrongoppositionbyanyofthetraditionalparties.148

Perhapsoneofthemost,ifnotthemost,intriguingquestionregardingthereformishowitwaspossible

thattheColombiangovernmentmanagedtocarryoutaradicalreformthatfromtheoutsetwasknowntoharmtheprotectedandprivilegedindustrialsector.Itisclearthatthenewideationalconsensus,theablepolitical strategyof theGaviria government,and the relative isolationof“technopols” facilitated

theprocess.However,thequestionstillremains.Howwasitpossiblethattheindustrialists,whichhadaccumulatedsomuchpowerduringthelastdecadesandhaddirectaccesstokeycentersofeconomicpolicymaking, allowed the government to carry out a reformwhichwould be expected to go against

theirinterests?

An important part of the answer lies on the unforeseen and subtle, but at the same time radical,reconfigurationthattheColombianprivatesectorexperiencedduringtheISI.TowardstheendoftheISIperiod, Colombia hadmanaged to relatively develop its domestic private sector. The industrialization

process,aselsewhere inLatinAmericaandotherpartsof thedevelopingworld,wasaccompaniedbyhigh levels of concentration, and in particular, the formation of business conglomerates, or gruposeconomicos.149Asaresult,bythelate1980simportantsectorsoftheeconomyweredominatedbylarge

MundoEditoresyDepartamentodePlaneacionNacional,1994).As inmostdevelopingcountries,theneoliberalreforms in Colombia were triggered by a crisis. But unlikemany other countries in the regionwhere the crisespreviousthereformsderivedfromhyperinflationorabalanceofpaymentscrises,i.e.,theywereeconomiccrises,inColombiaitwasapoliticalandsocialcrisis.Guerrillas,andespeciallydrugtrafficking,seemedtobecompletelyout of control. During the electoral campaign of 1989, Luis CarlosGalan, popular candidate of the liberal partyinfluenced by Gaitan’s ideas and likely winner of the elections, was assassinated. See, Sebastian Edwards andRoberto Steiner, ‘On The Crisis Hypothesis Of Economic Reform: Colombia 1989‐91’ (2000) 37 Latin AmericanJournal of Economics445. TheGaviria administration used an array of direct, indirect, and cross compensationmechanismsaswellasexceptionsorspecialprotections inordertogainthesupportofdifferentpressuregroupsfor the implementation of the reforms. Thus, for example, the trade liberalization was accompanied by animportantexchangeratedevaluationinordertogetthesupportofexporters.Strategictimingandspeedwasalsoon the government’s side. Noteworthy, theEstatuto Cambiario, one of the cornerstones of the ISImodel, wasabolishedbyCongressinaratherquicksessionandthereformbarelymadethefrontpageofthenewspapers.See,SebastianEdwards,supranote138;MiguelUrrutia,supranote138.148Inturn,labor,apressuregrouplargelyagainstthereforms,wasnotstrongenoughtohavean importantrole.With low levelsofunionization,especially ifcomparedtootherLatinAmericancountries,workerswerenotwellorganizedanddespiteopposingthereforms,theywerenotabletostopthem.Animportantexception,though,islargefirmandSOEs’laborunions.Infact,itisarguedthatthemomentousoftheaperturawasfirstaffectedbythefailedattempttoprivatizethetelecommunicationsstate‐ownedcompanyduetothefierceoppositionofitslaborunion.SebastianEdwards,supranote138.149See,WilsonPeres,ed.,Grandesempresasygruposindustrialeslatinoamericanos:expansionydesafiosenlaeradelaaperturaylaglobalizacion(1998)(Mexico:SigloXXI);andTarunKhannaandYishayYafeh,‘BusinessGroupsinEmergingMarkets:ParagonsorParasites?’ (2007)45JournalofEconomicLiterature331.Conglomeratesareaparticular form of business organization by which groups of firms are held together through interlockingdirectorates, holding companies, cross‐financing, and often continued family ownership, conducting business inseveral,oftenunrelatedmarketsandsectors.See,MarkGranovetter,‘BusinessGroupsandSocialOrganization,’in

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localfirmsanddiversifiedlocalconglomerateswhichovertimehadmanagedtoexpandtheirbusinessesandaccumulatecapabilitiesinacontextofprotectedmarkets.150

Economic groups and large firmsbornduring the ISI period in Colombia becamea typeof economic

organization that differed in significant respects from the traditional industrial firm interested in theprotectionsoftheISImodel.Overtime,Colombiangruposeconomicosbecamekeyemployers,sourcesof tax revenues, owners of mass media, political campaign contributors, accumulating thus a

tremendouspoliticalinfluenceoverthedirectionoftheeconomicstrategyofthecountry.Thesizeanddiversificationoftheirbusinessesplacedeconomicgroupsinabetterpositionatthetimeoftheopeningof the market. Hence, when the market was liberalized, the groups were able to divest in non‐

competitivesectorsandconcentrateitseffortsononlyafewcompetitivebusinesslinesornon‐tradablesectors. These firms usually had a dominant position in the markets of their core business, andtherefore,market liberalizationdidnotmeanan immediate threat to them.On thecontrary, in some

cases,itmeantanopportunitytoexpandtheirsaleswhichhadreachedaroofwithintheconfinesoftheprotected local economy. Thus, in many cases, groups were interested in having access to cheaperimported inputs and technology in order to reduce their production costs and gain access to export

markets.Inaddition,groupswereusuallybetterpositionedtohaveaccesstofinanceinordertosmooththetransitiontomoreopenmarkets.151

ThenationalallianceofindustrialiststhathadsupportedtheISImodelagainstforeigncompetitionbrokeupinthe1990s.152Economicgroupsandlargefirmsfoundthattheyhadmoreincommonwithforeign

N. Smelser and R. Swedberg,eds., The Handbook of Economic Sociology (Princeton: Princeton University Press,2005).Theriseofgruposeconomicos inColombiaweretheoutcomeofprocessesofbothverticalandhorizontalintegrationwhichweregenerallyfinancedthroughsubsidizedcredit,reinvestmentofprofits,orthefinancialfirmsattached to the group which provided the necessary liquidity to their expansion. Noteworthy, despite theexistence of competition legislation in Colombia since 1959, no single case was decided by the applicationauthorityuntil1996.150RudolfHommes,‘RegulationandderegulationinColombia:MuchAdoAboutNothing?’ (1997)40DesarrolloySociedad133.151 The sourcesof facilitatedaccess to financewere several: through the financial firmof thegroup; thehighlyprofitable“cashcow”firmofthegroup;orcapitalmarketswhichsaweconomicgroupsaslessriskyinvestments.152See,AngelikaRattberg,BusinessversusBusiness?GruposandOrganizedBusinessinColombia,LatinAmericanPoliticsandSociety,Vol.47,No.1(Spring,2005),pp.31‐54;Rattberg,Angelika(2001),ThePoliticalPreferencesofDiversifiedBusinessGroups:LessonsfromColombia(1994‐1998),3BusinessandPolitics1.Thebreakupwithintheindustrialist alliance was also reflected in the diminished power of the once powerful ANDI. On the one hand,business associations in general lost importance in the aftermath of market‐oriented reforms. They wereparticularly important in a context of strong government intervention, where development programs weretargeted to specific sectors, and some of the associated policy responsibilities were delegated to sectorassociations.Theneoliberalreforms,though,dismantledmanysector‐specificbenefitsthatwereadministeredbyspecialized associations. Also, as the productive structure of the country became more diversified, businessinterests became increasingly fragmented undermining the capacity of general associations to effectivelyrepresent them.On the other hand, increasingly powerfulgrupos económicos, with greater financial capability,overtimeovershadowedbusinessassociations. InthewordsofRevéiz,“presidentialpower isexertednowmorearound business groups than around business associations.” Edgar Revéiz, El Estado como Mercado (Bogota:FonadeandCarlosValenciaEditores,1997).Also,theassociations’mainsourceoffunding isthecontributionsofits affiliates, set in proportion to firm employment or output. Rodrigo Losada, Los Gremios Empresariales enColombia en los Inicios del Siglo XXI (Bogotá: PontificiaUniversidad Javeriana, 2000). This gives large firms and

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MNCs than with their Colombian allies, namely, small and medium size enterprises. Thus, once thereformswere perceived as inevitable, Colombian large firms changed the position they had adopted

duringthepreviousliberalizationattemptsofthelate1970sandlate1980s.Togetherwiththedomesticfinancial sectorwhichhademergedasanewpowerfulactor since1970s, theysupported the reformsandlettheirColombianformeralliesfall.Theyfolloweddifferentstrategies:sometookadvantageofthe

opportunities provided by the privatization of SOEs, others focused initially on their non‐tradableproducts, and still others built new alliances with new actors, i.e., foreign MNCs, suppliers andconsumersabroad,andsoon.153Thuseconomicgroupsbecameanewanddifferentkindof“economic

animal”, with their own economic interests and agenda, more prone to liberalization and market‐orientedreforms.

RebuildingandReconfiguringAlliancesAt the turn of the century, the international context changed and international events shook, onceagain, economic models and theories. Just like in the early 1990s when slow growth, inflation,

inequality,thedebtcrisis,andthefallofcommunismwereattributedtothe“ISImodel”,andultimately,to “excessive” state intervention in the economy, in the early 2000s slow growth, unemployment,inequality,and theglobalfinancial criseswereattributed tothe“neoliberalmodel”,andultimately,to

unrestrained markets forces and the lack of state regulation.154 In Latin America, the new context

businessgroupseffectivepowerovermanybusinessassociations; insomecases,thesefirmseffectivelyappointthe association’s head or pay some of the high‐ranking officials at the association. Nevertheless, this does notmeanthatbusinessassociationshavecompletelydisappearedofthepoliticalscene.When it isconvenient, largefirmscontinuetousebusinessassociations.Interestingly,eventhoughbusinessgroupshavedirectinfluenceoverthepolicymakingprocess, theyalso frequentlyparticipate throughbusinessassociations.Oneadvantageof thisstrategy for groups is that other actors and the public at large see business associations as representative ofintereststhataremoregeneralthanthoseofbusinessgroups;theviewspromotedbyassociationsarethusmoreeasilypresentedtothepublic.Asshowninthenextsections,manypublic‐privatepolicyinitiativescontinuetobecanalizedthroughbusinessassociations.153 As mentioned before, another important compensatory measure was the significant devaluation of theColombianpesowhichmadedomesticproductstemporarilymoreinternationallycompetitive.154Thefollowingaresomeofthekeyaccepted“facts”whichhavebeen interpreted inawaythatdiscreditstheneoliberalmodeland liebehindtheemergingconsensusondevelopmenteconomics:a)thefinancialcrisesthathave hit countries, regions, or the world economy since the mid 1990s (Mexico 1994, Thailand, Korea, andIndonesia1997,RussiaandBrazil1998,Turkey2000,Argentina2001,UnitedStates2008)andthecounterexampleofChilewhichhasbeenusedparticularlyinargumentsagainsttheliberalizationofcapitalaccounts;b)themediangrowth rate in low‐andmiddle‐ incomecountrieswhich fell from2.5% in1960s‐1970s tovirtually0% in1980s‐1990s.Evenifthedebtcrisisofthe1980sisnottakenintoaccount,becauseitcouldbeattributedtotheISImodel,the levelsofgrowthratehavebeenratherdisappointing;c)Thelevelsofunemploymentwhichsignificantlyroseduringthe1990s.Whilethisfactwasinterpretedatthetimeasthelackoflabormarketsflexibility,todayitisseenunderthelightoftransitioncostsinthepro‐marketliberalizationreformsandtheresultofthelackofsocialsafetynets; d) since the 1980s inequality has increased among and within countries, and while poverty levels havedecreased, relative poverty has remained at very high levels. Moreover, the decrease in absolute poverty isexplainedlargelybythedecreaseinpovertyinChinaandIndia,twoofthemajoroutlierswhoareconsiderednottohavefollowedtheWashingtonConsensus.Althoughitisrecognizedthattheirimpressiveeconomicgrowthhasbeen the result of their pro‐market reforms, it is stressed that their policies have been very heterodox, andresponding to the specific context inwhich they took place. Similarly, themiracle of the Asian Tigers has beenreinterpretednotastheresultofopenandderegulatedmarkets,butratherasanexampleofpositivesynergiesbetweenthestateandthemarket,followingtooaheterodoxpath.See,amongothers,AliceAmsden,Asia'sNext

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opened the door to the emergence of left and left‐of‐centre governmentswhich took power usuallywith a rather strong anti‐“Washington Consensus” discourse.155 In this turn to the left in the region,

Colombiawasanoutlier.Althoughintheelectionsof2002thelefthadahistoricallygoodperformance,theelectoratefavouredthecandidatethatdeployedthemostradicaldiscourseagainsttheguerrillaandpromisedtheendoftheconflict,theright‐wingcandidateAlvaroUribeVelez.Afterbuildinghiscareer

within the Liberal Party, Uribe ran for the presidency as an independent candidate. He received thestrongsupportofparamilitarygroupsandmanagedtogetthesupportoftheconservativewingwithintheLiberalPartyandmostofthevotesoftheConservativeParty.Itwasthefirsttimethatcandidatenot

formallybelongingtoeithertheLiberalortheConservativepartywonthePresidencysince1958whenthe Liberal and Conservative parties set the National Front. In Uribe’s campaign, the economic andsecurity discourses were closely interlinked, associating the end of the guerrilla conflict with higher

levelsofinvestmentandgrowth.Furthermore,inadecademarkedbyneoconservatismandthe“waronterrorism” in the United States, Uribe received the blessing of President Bush which translated intopolitical support,economic“cooperation” throughaFreeTradeAgreement,and importantly, financial

resourcesmainlythroughthePlanColombia.156

TheColombiangruposeconomicosandtheforeignTNCs,anincreasingly influentialactor inColombianpolitics particularly after the apertura, decisively supported Uribe.157 And not surprisingly, as in theapertura period, this group of firms were, once again, some of the main beneficiaries of the new

economicstrategy.Comparedtothe1990s,however,theallianceswithintheprivatesectorexperienceda reconfiguration and therewere some important shifts in the rationale and instruments behind theindustrialpolicies. Indeed,oncetheneoliberaleconomicmodelwasconsolidatedandthelosersofthe

aperturareconvertedthemselvestosurviveinthenewenvironment,theColombiangruposeconomicossoughttorebuildanalliancewiththem.Inanincreasinglycompetitiveglobaleconomy,andparticularly

after the definitive incorporation of China into the world trading system in 2001, many Colombianbusinessgroupsandlargefirmsrealizedthatinordertosurvivetheyneededastronglocalcompetitive

Giant:SouthKoreaandLateIndustrialization(Oxford:OxfordUniversityPress,1989);RobertWade,GoverningtheMarket: Economic Theory and the Role of Government in East Asian Industrialization (Princeton: PrincetonUniversityPress,1990);RobertWade,‘Globalization,growth,povertyandinequality’,inJohnRavenhill,ed.,GlobalPolitical Economy (Oxford: Oxford University Press, 2007); Meredith Woo‐Cummings, The Development State(Ithaca:CornellUniversityPress,1999);JosephStiglitz,GlobalizationandItsDiscontents(London:W.W.Norton&Company,2002),andMakingGlobalizationWork(London:W.W.Norton&Company,2006).155PatrickBarrett,DanielChávez,andCésarRodríguez‐Garavito,eds.,TheNewLatinAmericanLeft:UtopiaReborn(London:PlutoPress,2008);FranciscoPanizza,‘Unarmedutopiarevisited:theresurgenceofleft‐of‐centrepoliticsin LatinAmerica’ (2005)53 Political Studies716; JorgeCastañeda, ‘LatinAmerica's LeftTurn’, (2006)85ForeignAffairs28.156The“PlanColombia”wasdevelopedbyDemocratPresidentBillClinton(1993‐2001)andConservativePresidentPastrana(1998‐2002)asalong‐termplanaimedatputtinganendtoColombia’slongarmedconflictandeliminatingdrugtrafficking.ThePlanwasfurtherexpandedbyRepublicanPresidentGeorgeW.Bush(2001‐2009)andPresidentAlvaroUribe(2002‐2010).157Ontheonehand, inthe lastdecadestheguerrillagroupshadbecomenotonlyaproblemandan“extracost”fordoingbusiness,butalsoitwasdirectlyaffectingthesocialandeconomiceliteswhowerepersonallyaffectedbyincreasingkidnapsandassassinations.Ontheotherhand,theexplicitpromiseofPresidentUribetorestore“theinvestor’s confidence”was an open statement according towhich under his administrations (2002‐2006, 2006‐2010)themajoreconomicpolicieswouldbetargetedtofavourthem.

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base. Therefore, they sought to establish new alliances and linkages with their old Colombianpartners158. This interest coincided with that of foreignMNCswhich also benefit from a strong local

base.While in thepast local and foreign firms fought for rents createdwithin thenational economy,today theyfightforrents intheglobalmarket.Theexpansionofthemarkethasmaderoomformoreplayers and the possibilities of alliances between local and foreign firms which have the common

interest of having thebest quality of labor, infrastructure and inputs at the lowest possible cost. Thenationaleconomyno longerdefines thesizeof themarketanddemand,but itprovides theplatform,thebasicinputsforcompetinginamoreopenglobaleconomy.

AstheColombianprivatesectorbeganareconfigurationinthe2000s,aneweconomicconsensususing

a distinctive vernacular and referring to new theoretical frameworks emerged and provided theideational legitimation to thepolicies that seek to consolidate thenewalliance. Asmentioned at thebeginningof thepaper, the structures,modes, ideas, images, and arguments of a neo‐institutionalist

school of development is increasingly dominating the debates among scholars and policymakers,regardless of their political orientation, and serving as a legitimation for policy arguments, design ofpublic policies, and political decisions. In this context, we have seen the important role that some

leadingscholars,likePorterandHausmann,haveplayedinthedesignofthenewpoliciesinColombia.159Moreover, as seen in Section II, important parts of the 2006‐2010DevelopmentNational Plan, whichprovide the legitimation for export,FDIand competitivenesspolicies,are embedded in thenew ideas

aboutdevelopmentandopenlyendorsethem,withoutnecessarilyrejectingthepreviousdiscourse. Inturn,behind the robesof thenewdiscourse,manypolicy recommendationsof theUribegovernmentlargelyfollowedthetrendsofthe1990s.

Finally, inorder tomakeabasicassessmentof the industrialpolicies emergingduring the2000s, it is

important totake intoaccounttheoveralloutcome.Regardingexports, inthe2000sColombiahadanoutstandingperformance.Ittripledthevalueof itsexports,movingfromUS$10billionin2002toUS$

32billionin2010,dueto increases inbothexportablevolumesandinternationalprices,particularly incommodities. While the reasons behind the export performance of Colombia are several, exportpromotionandcompetitivenesspolicieshaveundoubtedlyplayedapositiverole.Whatis importantto

note is that while the Colombian export performance was certainly laudable, the export profile ofColombiain2010wasvirtuallythesameasin1991,thebeginningofthepro‐marketreforms.Morethan70%ofColombianexportscontinuetobecommoditiesandprimaryproducts; instead,high‐technology

exports represent less than 3%. While it would be hard to attribute these results just to exportpromotionandcompetitivenesspolicies, it is clear thatColombiahasnotchanged itswayof insertioninto the world economy nor mademuch progress in the transformation of its productive structure.

Despite the shifts observed in discourse, policies and instruments in the last decade, results seem tohavevariedquantitativelybutnotqualitatively.Although it is true that itmaybe toosoon tomakea

158Thistime,though,interestswerenolongerdrivenbynationalistsentimentsasithappenedinthe1960sand1970swhennationalismswerefuelledbythedecolonizationmovementandtheColdWar.159 Although it is hard to “locate” the institutionalist school of development and clearly identify a place as theCEPAL or the Chicago school in former periods, in the case of Colombia, scholars associated with HarvardUniversityhaveplayedasignificantrole.

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completeevaluationoftheimpactofthenewpolicies,theanalysisabovehasshownthatnothinginthedesignofthepoliciesandinstrumentsallowsforeseeinganysignificantchangeinthefuture.

WithregardtoFDI,since2004Colombiahasshownanoutstandingperformanceintermsoftheamount

ofFDI receivedcompared to itsneighbors in the region. It surpassedArgentina in theLatinAmericanranking, behind only Brazil andMexico, the two largest economies in the region, and Chile the bestperformingeconomy in theregionsince the1980s.FDI inflowshavemovedfromUS$2.134million in

2002toUS$7.207millionin2009,reachinglevelsofUS$10.596millionrightbeforetheglobalcrisisof2008.However,mostinvestmentinflowshavegoneintosectorswhereColombiaalreadyhas“natural”comparativeadvantages,maintaining theproduction structureachievedduring the ISIperiod. Indeed,

most inward FDI were directed to the exploitation of natural resources (mainly oil, gas and mining),representingmorethan60%oftotal inflows.Moreover,investments inthemanufacturingsector,onlythethirddestinysector,representingaround15%oftotalFDI,havelargelybeentheproductofmergers

andacquisitionsratherthangreenfieldinvestments.

7.LegalImplicationsThissectionseekstorevealthe“implicitlegaltheory”behindthenewdevelopmentstrategyadoptedbyColombia160.Italsoprovidesapictureoftheroleoflawduringthe2000sinthelightofthenewpoliticaleconomy of development. Finally, it tries to show how Colombia has in fact responded to the

fundamental legal challenges of the new developmental state as identified by David Trubek in hischapter.161

ImplicitLegalTheoriesoftheISIandtheWashingtonConsensusThe Colombian case endorses the implicit legal theory identified by Kennedy for the ISI and theWashington Consensusmodels. In the 1960s and 1970s, in Colombia lawwas broadly understood as

purposive.AstheregulationofFDIshows, lawwassubordinatetosocialpurposes–eitherto“nationaldevelopment”orto“economicandtechnological independence”,ratherthanexpressingapriori limitsorpurposesofitsown.Thislegalpragmatisminvolvedapurposivereasoningtolinklegalarrangements

with social needs and objectives (“antiformalist social” in terms of Duncan Kennedy)162. The ISI alsoinvolved the creationofpublic law institutions, establishedbystatuteand implementedbypublic lawbureaucracies(Proexpo,NDPInvestmentReviewCommittee).Lawallocatedauthorityinpublicagencies

whichhadmoreorlessdiscretionarypowertoapproveinvestmentsornot,toprovideexportsubsidiesornot.Althoughnotexplicitly,developmentprofessionalshadahighly instrumentalistviewof law.Astheattempts to regulate locallyand internationally FDI show, lawwasassumedtobeapowerfuland

effective instrument of social and economic transformation, with the power to overcome barriersinheritedfromthepastorimbricatedinlocalorinternationalcontexts.Finally,whileretainingthefocuson thenational level, lawwasalso increasingly internationalized inorder toachieveeconomicgoals–

thinkoftheGATT,ALADI,ortheACN.Ofcourse,theseimplicitlegalideashadblindspotsandbiasesthat160HereIdrawupontheideaof“Implicitlegaltheory”asdevelopedbyDavidKennedywhenhereferstothelegalassumptionsbehindtheeconomicandpoliticalprojectsofdevelopment.See,DavidKennedy,supranote8.161See,DavidKennedy,supranote8.162See,DuncanKennedy,supranote1.

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made more difficult to see the dangers of state failure and rent‐seeking, the difficulties of legalimplementation,orthebenefitsofprivateorderingsandprivatelaw.

In theneoliberal reforms law remained as pragmatic andpurposive instrument of policy as in the ISI

period. The reforms implied the building of completely new legal regimes, locally and globally, tosupport markets. As shown by the reforms in FDI, the neoliberal law remained instrumentalist andpositivist.Thestatutesproposedtoaccomplishthenewgoalsofliberalizationwereusuallystandardized

and trying to reflect international “best practices”. And as during the ISI period, policymakers werehighlydependentonlegislativepositivismandunconcernedabouttherelationshipbetweenlawinthebooksand law inaction.However,at thesametime, thereweresignificantandapparentdifferences.

Whileinclassicaldevelopmentalismlegal instrumentswereusuallyofapublicnature,ofthecommandand control genus, and law was seen primarily as a tool to empower the state and render itsinterventionsandregulationsinthemarketmoreeffective,intheneoliberalmodellawtookadifferent

direction. During the Washington Consensus period, law was basically seen as a framework for themarketandashieldagainstunduestateintervention.Legalinstrumentstooktheformofrights,privatelaw gained prominence, and legal arrangements sought to protect private property rights, facilitate

contracts,andlimitstatediscretion.Lawnolongerwasusedto improvetheeffectiveexerciseofstatepower,butasamoreeffectiverestraintofgovernmentrentseeking.Also, inahighlyformalistviewoflaw, courts grew in significance, central to the enforcement of market transactions and limitation of

publicdiscretion(see,forexample,thenewFDIregime).

TheRoleofLawinthe2000sIn the last decade, Latin America has experienced important economic changes which have beenaccompaniedbyareorientationof itseconomicandsocialpolicies, including industrialpolicies.Totheextent that thesepolicies impliednewwaysof state intervention, somescholarshavesuggested that

theconfigurationofa“newdevelopmentalstate”(NDS)isinthemaking.163Thisbookisanattempttobetterunderstandwhattheimplicationsofthesechangesareforlawandlegaltheoryandpractice.

As thecaseofColombiashows (seealsoHelenaAlviar’s chapter), ifanythingcharacterizes theNDS ispreciselythelackofasingleapproach.Instead,thecurrentdevelopmentstrategyshowsamixedpicture

where rationales for state intervention, no intervention, or even for the type of intervention, varyconsiderably depending on the issue or policy area. This paper argues that in the case of industrial

163InthispaperIhavebeenreluctanttousethetermof“newdevelopmentalstate”becauseitstressesthebreakand differences with previous forms of state, particularly the neoliberal state,moving attention away from themanyaspectsofcontinuityinpoliciesbetweenthetwoperiods. Inaddition,the“developmental”aspectevokestheideathatthestate isinterveninginwayssimilartothoseofthe“developmentalstate”whichemerged inthetwentieth century in Latin America and South East Asia. However, a closer look at current forms of stateinterventionshowsthattheyhavelittleincommonwitholdones.Itistruethattodaythereismorestateactivismanddirectinterventionascomparedtothetrendsofthe1980sand1990s;buttheformssuchactivismtakestodayarequitedifferent from thepast, and reducingdevelopmentalism to just state intervention leavesaside criticalaspects of the developmental state. Finally, the reference to the state transmits the idea that thewhole stateapparatusmaybeeitherdevelopmentalorneoliberal,orforthiscase,neo‐developmental.Rather,inthispaper,Ihave argued that the state’s actions are characterized by themultiplicity of rationales underlying intervention,typesofinterventions,shapes,instruments,discourses,policies,andsoon.

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policiesinColombiathisdiversityinapproachesrespondstoatleastthreeinterrelatedfactors:thenewideational consensus among scholars and policy makers about how to bring about economic

development, theaccumulationof institutional layersand legalarrangements inherited frompreviousdevelopment strategies, and the specific political economy underlying the policy reforms. What isinterestingtonoteisthatcurrentideationalconsensus,unlikethedevelopmentalismofthe1960sorthe

neoliberalismofthe1990s,allowsforthepossibilityofcoexistenceofmultiplerationalesforstateaction–oratleastitdoesittoagreaterextentthanpreviousdiscourses.164Unlikeitspredecessors,thecurrentconsensus explicitly rejects the idea that “one‐size‐fits‐all” and emphasizes the critical importance of

context in effectivedevelopmentpolicies.Furthermore, it rejects thedichotomyofeither thestateorthemarket,andratheritembracestheideaofthestateandthemarket.Thisflexibilityandmoreopenstructure allows policies sustained by apparently contradictory rationales to live together without

puttingundertoomuchstresstheboundariesandcoherenceofthe“model”.

Asthispaperhasshown,unlikewhathappenedwhentheISIortheneoliberalpoliciesarose,the“new”strategy does not involve a neat break with the recent past. Rather, and particularly in the case ofColombia,thereseemstobemuchmorecontinuitythanchange.Infact, it istellingthefactthatevery

time Colombia embarkedon a new development strategy in thepast, it enshrined so in thenationalconstitution.165Thecurrentpoliciesandstrategy,instead,havesmoothlyemergedwithouttheneedfordeep reforms in major legal structures such as the constitution, or international legal and economic

structures.

Thispaperhasanalyzedthreeindustrialpolicieswhichhavefolloweddifferentpathsandrespondedtodifferent rationales. In the caseof export promotionpolicies,most of the instruments analyzedwerebornduringtheISImodel.ThePlanVallejohassurvivedalmostunalteredsinceitscreationinthe1960s.

Similarly, Proexport and Bancoldex are the continuation of the old Proexpo. Within this continuity,though, there have been some changes. Proexport and Bancoldex are no longer state institutions

operating under public law. Rather, today they are respectively a public‐private agency and a publiccommercial bank operating under private law and using public and private law instruments as theirmeans of action. Also, Proexport has internationalized its operations and notably increased its

capabilities,effectivenessandknow‐how.Bancoldex,inturn,afteraperiodofexclusivefocusonimport‐export operations, has been recently converted into a multipurpose development bank orientedtowardsmicroandSMEs.All inall, in relation to exportpromotionpolicies,Colombiahasadoptedan

approach of shallow intervention, seeking to address market failures such as information costs,asymmetriesofinformation,andsoon,whicharetypicalofexportoperations.Whileitistruethatmostof the exportpromotionpolicieshavesurvived from the ISIperiod, it isalso true that they represent

limitedwaysof state intervention that fitwell inachastenedneoliberalmodel; theywerenotpartofthehardcoreofISIpolicies.Inthispolicyarea,lawisseenasaninstrumentofthestatethatintervenestoaddressmarketimperfections.Perhapsthemajorchangewithrespecttothepastisthatwhileinthe

ISItheseinterventionswerecarriedoutbypublicinstitutionsthroughpubliclawinstruments,todaythe

164Inaway,itresemblestheflexibilityofthedevelopmentcommonsenseofthe1970s.See,DavidKennedy,supranote8.165Thiswasthecaseoftheconstitutionalamendmentof1968andtheenactmentofthenewconstitutionin1991.

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institutions can be public‐private entities using private and public law instruments and developingoperationsbeyondtheboundariesofthelocaleconomy.

FDI policies followed a clearly different path. Unlike export promotion, FDI policies experienced a

radicalization in the later stages of the ISI period which in the 1990s was seen as one of thecrystallizationsoftheexcessesofstateintervention.Accordingly,thelegalregimeerectedduringtheISImodelwasvirtuallydismantledandaradicallynewonewasbuiltduringthe1990s.Therationalebehind

the new regime responded to the most basic premises of the neoliberal model: adoption of deepinternationalcommitmentsrecognizingamplerightstoprivateinvestors,providingstrictprotection,andlimitingto thegreatestextentthe levelofdiscretionofthestate.During the2000s,thisapproachhas

been reinforced through thedevelopment of a network of BITs and the creation of new instrumentssuchastheLSCsandtheFTZs.Onlymarginallythestatehastriedtoretainsomepolicyspaceas inthenegotiationofBITs.Inthispolicyarea,lawcontinuestobeseenthroughthelensesofrights,guardedby

independent courts, that set a limit to state action and discretion and provide guarantees for theprotectionofprivateinterests.

Lastly, competitiveness policies provide the example of a new way of state intervention that issupportedbythenewideationalconsensusemergingaftertheWashingtonConsensus.Asseen,thePTP

hasbeendesignedwith theadviceof leadingscholarsanddressedwith the robesof themost recentideas in development economics. As the old industrial policies, competitiveness policies seek thetransformationoftheproductivestructure;andastheoldindustrialpolicies,theypickwinners–though

without saying it explicitly, and little by little broadening its scope. The rationale is that effectivedevelopmentpoliciesneedtheeffectivecollaborationbetweenthepublicandtheprivatesectorandtherole of the state is mainly one of coordination. Given that the PTP is in its early stages, it is still

institutionallyweakandhasnotresortedtoaparticularlegalinstrumentinasystematicway.Instead,ithas used a variety of instruments ranging from policy directives produced by CONPES, non‐binding

agreements among private and public actors, and non‐official internal documents. Still, perhaps themost commonly used instruments are internal documents and non‐formal (oral) mechanisms, whichgive flexibility and expediency to the system as well as poor transparency. While the coordination

actionsencompassawidevarietyofpublicandprivateactors includinggovernmentalagencies,privatefirms, business associations, labor unions, and universities, there is a selected group that occupies aprivilegedpositionwithinthePTP.Theimplementationoftheprogramcountswiththekeyparticipation

of international private consulting firms, and the main interlocutors in the private sector are thebusinessassociationsandthelargestfirmsintheirrespectivesectors.Inthispolicyarealawisseenasacoordination tool, as a means to set and improve the channels of communication and collaboration

between thepublic and theprivate sectorwith the goal of reducing transaction costs and increasinginformationandknowledgeforpolicymakingandbusinessdevelopment.

What is the political economy behind these policies, instruments and new strategy? The neoliberalreforms of the 1990s, locked‐in in profound legal reforms which included constitutional and

internationalinstruments,leftColombiamoreopenandvulnerabletochangesandswingsintheglobaleconomy. Unlike most countries in the region, the international financial crises and the fall of theWashingtonConsensushitColombiaatatimewhenaconservativegovernmentwastakingpowerand

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with its main efforts focused on putting an end to the guerrilla. At the same time, throughout theregion, thecrisisof theneoliberalmodelwasaccompaniedbydemands for greater state intervention

andthebeliefthattheeconomicdestinyofthecountrycouldnotbeleftjusttothemarket.Thistime,though, the conditionswerenot given for the types of interventions that characterized the ISImodelafter the crisis of 1929 and the two world wars. Institutional and legal constraints, vested interests,

ideological biases, and political conditions in Colombia were not favorable for actions such asintervening directly on prices, closing the market or de‐linking from the international markets, ortransferringprivatepropertytostate’shands.

The social pressure for state action, though, was still present. Local private firms in turn were

threatened by foreign competition and instability, and sought some sort of state intervention. Largefirms and economic groups saw that the state could play a coordinating role that would help themrebuildthealliancewithlocalpartnersinordertobecomeinternationallymorecompetitive;smallfirms,

in turn, saw in the state a source of support that would help them overcome obstacles and acquirecapabilities to survive and compete in open markets. On the other hand, the state, and Uribe’sgovernment in particular, faced the challenge of how to intervene in the economy in order to keep

levels of employment and investmentwhen the state no longer has direct control of key assets as itusedtohaveintheISIperiod?Inotherwords,howtoinfluenceoninvestmentdecisionsandcarryoutatransformation of the productive structure in spite of not holding the property over the country’s

productiveassets?Howtocontroltheeconomywithouthavingthestringsthatdirectlymoveit?

Theindustrialpolicyresponsetothischallengeinthe2000shasbeentwofold.Ontheonehand, ithassought to incentivize private investments by reducing the costs associated with risks of regulatorychanges and by granting tax exceptions. This has been the role of BITs, LSCs and FTZs. On the other

hand, ithassoughtto increasetheproductivityoftheprivatesectorbyreducingcostsassociatedwithdoingbusiness.Inthefaceofacompetitivethreat,thestateresponsehasnotbeenprotectionasinthe

ISI,butstrengtheningofcapabilitiesintheprivatesector.Forthispurposethestatehasusedaplethoraofinstruments.ThecoordinationroleofthePTP,thedraw‐backsystemofPlanVallejo,theinformationand marketing services of Proexport, the training programs for SMEs of Bancoldex are, ultimately,

differentwaysthatthestatehastoreducetransactioncostsandassisttheprivatesectortoimprovethewayitrunsbusiness.

Thispoliticalchallengeofthenewdevelopmentstrategyhasbeencompoundedbylegalchallengestoo.Traditional public law instruments of the top‐down, command and control type, were not effective

becausethestatenolongerhaddirectpropertyovermajorproductiveassets,becausetheirusewasnotpossible due to legal and institutional restraints, or simply because of ideological biases or politicalconstraintsthatdidnotmakethemanoption.Atthesametime,privatelawinstrumentsingeneralare

less effective to have direct control over property that is in others’ hands, and therefore, did notconstitute a reliable alternative tool either. As a result, the state hasresorted to an eclectic rangeofinstrumentsvaryingtheiruseaccordingtotheparticularcircumstances,specificneeds,andpolicyareas.

Inhischapter,Trubekposesthreemajordilemmasforlawinanewdevelopmentalstate:1)howtohave

flexible and revisable legal frameworks without affecting private investors’ confidence in the legal

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framework so as they are willing to invest; 2) how to avoid agency capture in close public‐privatecollaborations; and 3) how to guarantee transparency and accountability in policymaking. From the

analysis of its industrial policies, it is possible to suggest that the Colombian legal response to theseproblems has been the following. Regarding the first dilemma, Colombia has adopted anuncompromising formalist approach to theprotectionof private property and the constraint of state

action,offeringallsortsofguaranteestotheprivate investor ifshedecidestomakeaninvestment.Asseenabove,thishasbeentheroleofBITsandLSCs.Ontheotherhand,ithasadoptedanapproachoflimited intervention in an attempt to influence when, how, where the private investor makes an

investment. For this purpose it has used a variety of instruments such as the PTP, Proexport, orBancoldex, being flexible inaddressing thespecificneedsof theprivatesectorandpromotingaclosecollaborationbetween thepublicandtheprivate.Regarding thequestionofcapture,giventhatmany

reformshavebeenrelatively recent, it ishard tosaywhetherpublic institutionshavebeen captured.However, itisclearthatthestatehaschosenaselectedgroupofinterlocutorsandbeneficiarieswithintheprivatesector(businessassociationsandlargefirms)andaspecific groupoffirms(domestic large

firms) has benefited most from the systematic use of instruments and services. BITs are naturallytargeted to large multinational corporations, LSCs and FTZs are intended to benefit large firms. ThenationalcompetitivenesssystemandthePTPhaveassignedprivilegedrolestointernationalconsultants,

businessassociations,andlargefirms.SurveysrevealthatPlanVallejoandProexportservicesaremostlyused by large firms. In this context, Bancoldex, by focusing its services on SMEs, seems more anexceptionthantherule.Finally,regardingtransparencyandaccountability,theseareaspectsthathave

notbeenamajorconcerninthedesignandimplementationofColombianindustrialpolicies.Moreover,as seenabove, even in thosepolicies that take themost formalistapproach, thegovernmenthashad

amplemarginsofdiscretiontomakechoices.

8.ConclusionsThis paper on industrial policies is an attempt to better understand the configuration of the new

development strategy adopted by Colombia in the last decade. The paper shows that the currentconfigurationofdevelopmentpoliciesinColombiarespondsonlypartiallytothespecificfeaturesofan

emerging economic and legal consensus. On the one hand, some of the basic precepts, backgroundideasandassumptionsoftheWashingtonConsensusarestillineffect.Ontheotherhand,awidevarietyof policies, institutions and legal instruments, with different rationales and born in the past under

different development models, have survived waves of reform, transformed themselves, and coexisttoday. Ifanythingcharacterizesthenewstrategy isthelackofasingleapproach.Thisfeature, inturn,may be positive or negative. On the one hand, it may be positive to the extent that it allows for a

pluralityofformsofregulationanditmaymakeinterventionmoreresponsivetothespecificneedsofcontext.Ontheotherhand,themixedpicturemaymakeitfuzziertoidentifytypesofrulesthatprevailand systematic biases in their application. This paper has tried to shed light on this blurry picture

showingthatintheColombiancasebehindthemergeofthepublicandtheprivatetherehasbeenmorecontinuitythanchange,bothinrulesandinoutcomes.

law and the new political economy of development in...

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