Foreign Investment in Colombia's Financial Sector

39 Pages Posted: 30 Mar 2000

See all articles by Adolfo Barajas

Adolfo Barajas

International Monetary Fund (IMF) - Western Hemisphere Department

Roberto Steiner

Universidad de los Andes, Colombia - Department of Economics

Natalia Salazar

Fedesarrollo

Date Written: November 1999

Abstract

This study analyzes foreign investment in Colombia?s financial system, chronicling major changes in legislation, describing how investment flows evolved over time, and comparing performance of foreign-owned versus domestic banks. Panel data estimations reveal that financial liberalization in general had a beneficial impact on bank behavior in Colombia. Although the positive contribution of foreign entry may be overstated in recent studies by not controlling for other liberalization factors, foreign (and domestic) entry beginning in 1990 did improve bank behavior by enhancing operative efficiency and competition. However, this came at the expense of a deterioration in the loan quality of domestic banks.

JEL Classification: E4, F3, G2

Suggested Citation

Barajas, Adolfo and Steiner, Roberto and Salazar, Natalia, Foreign Investment in Colombia's Financial Sector (November 1999). IMF Working Paper No. 99/150. Available at SSRN: https://ssrn.com/abstract=218069 or http://dx.doi.org/10.2139/ssrn.218069

Adolfo Barajas (Contact Author)

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4152 (Phone)
202-623-6070 (Fax)

Roberto Steiner

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia
+571 341 2240 (Phone)
+571 281 5771 (Fax)

Natalia Salazar

Fedesarrollo ( email )

Calle 78 No 9-91
Santafe de Bogota, 75074
Colombia
(571) 334-9912 (Phone)

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