Weak competition in product markets

Colombia ranks very well in terms of its business environment relative to other Latin American countries (World Bank, 2012). However, productivity growth is hindered by weak competitive pressure in product markets. These may be related to rules of conduct imposed by regulators, entry barriers, and targeted preferential treatment. In the past, politicians have extended favourable tariff and tax treatment and export incentives to sectors and regions with large voter bases, powerful business groups or strong political connections (Eslava and Melendez, 2009). The industrial sectors that benefited most from these privileges over the period 1998-2006 include food products, apparel and textiles, and the flower industry. Because of this, overall productivity is hindered by excessive concentration in certain sectors. For instance, concentration in the mobile phone sector is one of the highest in the world, with an adverse impact on service prices, calling for measures to increase the competition among mobile operators (Jullien et al., 2010).

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