Colombia's economy and risks

Colombia's economic growth accelerated in 2010 to its fastest in three years, led by a leap in mining and oil output and a robust manufacturing sector, and the outlook is for faster expansion this year.

Colombia has enjoyed a boom in investment especially in oil and mining sectors as security has improved.

Foreign direct investment has grown five-fold since a 2002 U.S.-backed crackdown on leftist guerrillas.

It regained its investment-grade credit rating from Standard & Poor's in mid-March.

The debt ranking makes Colombia more attractive to foreign investors and could thus further boost growth and pave the way for more upgrades.

Here are some facts about the economy and political risks:

ECONOMIC GROWTH

Finance Minister Juan Carlos Echeverry expects the economy to grow 5 percent to 6 percent this year, higher than a previous estimate of 4.5 percent.

The gross domestic product grew 4.3 percent in 2010, nearly triple 1.5 percent growth in 2009.

The mining and oil sector soared 11.1 percent in 2010 and manufacturing gained 4.9 percent.

Colombia's quick recovery from the global recession was also driven by a jump in consumption, aided by low interest rates.

FISCAL DEFICIT

President Juan Manuel Santos has introduced reforms to tackle the stubborn fiscal deficit, including adjustments to the country's oil and mining royalties and a new fiscal rule.

Colombia lost investment grade status during a 1999 fiscal crisis. But Wall Street began to see a turnaround in the country with the 2002 presidential election of Alvaro Uribe, who used U.S. military aid to beat back leftist rebels and improve security.

Colombia expects to have slightly lower fiscal deficits in 2011 than expected despite higher spending to offset damages caused by recent floods.

The central government deficit including the cost of heavy rains was 3.9 percent in 2010, below the goal and lower than 4.1 percent in 2009.

The consolidated public sector deficit last year was 3 percent of GDP compared with a projection of 3.6 percent.

The government expects 3.5 percent for 2011.

Santos's government hopes to bring the fiscal deficit down to 0.5 percent of GDP by 2014.

Investors will keep a close eye on the royalties reform, which has faced resistance from pro-government lawmakers who represent oil-producing regions.

INFLATION, PESO AND INTEREST RATES

Colombia raised its key interest rate by 25 basis points for the second straight month in March to 3.5 percent and signaled further increases to rein in inflation during strong economic growth and surging global prices.