A Study of Industrialization in Colombia

Part I, Analysis

by Richard R. Nelson


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Part I of a two-part study on Colombian industrialization describes three key characteristics of Colombia's manufacturing sector that contribute to the country's economic difficulties: low productivity; a structure that is heavy on consumer goods industries and light on intermediate and capital goods industries; and the small size of the manufacturing sector relative to the total economy. The interaction of these three characteristics poses a problem that is compounded by the falloff in coffee export earnings and a failure to develop major new sources of nonmanufacturing export earnings. The study shows that low productivity in industry could take care of itself to a considerable extent if the modern subsectors could expand rapidly. However, this would require imports and a large amount of capital, which would have to come from two sources: foreign exchange and domestic savings. The analysis suggests that increasing domestic savings would tend to cause a rise in unemployment due to curtailed activity in consumer goods industry, but that an increase in foreign exchange would permit the modern sector of Colombia's manufacturing industry to be expanded without high unemployment.

This report is part of the RAND Corporation Research memorandum series. The Research Memorandum was a product of the RAND Corporation from 1948 to 1973 that represented working papers meant to report current results of RAND research to appropriate audiences.

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