PERFORMANCE OF BOGOTÁ AND CITY GROWTH 1990-2007 Case Study

June 4, 2007

Prepared by:

Jorge Hernán Cárdenas S. Johana Jimenez

Jorge Barriga

June 2007

TABLE OF CONTENTS Executive Summary……………………………………………………………….. 1 Chapter 1 Decentralization in Bogotá ……..…………………………………. 6 1.1 Administrative Decentralization …………………………………….……… 7 1.2 Political Decentralization …..……………………………………………….. 11 1.3 Fiscal Decentralization ……………………………………………………… 12 1.4 Citizen participation and social control ……………………………..………. 17 Chapter 2 Best Practices in Bogotá as a Result of Decentralization ……… 18 2.1 Design and Implementation of an Integral Policy for Safety and security..18 2.2 The efficiency of public finance management …………………………… 19 2.3 Definition and development of a long term urban city model …..………. 21 2.4 Mobility Strategy …………………………………………………………… 22 2.5 Recovery and development of public space ………………………………. 24 2.6 The revolution in Education Management …………………………………. 26 Chapter 3 Structure and Economic Performance of Bogotá ………………… 29 3.1 Economic and industrial profile …………………………………………… 29 3.2 Evolution of Industry Structure ……………………………………………. 30 3.3 Economic growth with respect to the country …………………………… 31 3.4 Economic performance of Bogotá and its more dynamic economic sectors

3.4.1 Productivity ………………………………………………………... 32 3.4.2 Employment generation ……………………………………………. 34 3.4.3 Creation of new firms ...……………………………………………. 35 3.4.4 Trade …………………………………………………………………. 36 3.4.5 Most Dynamic Productive sectors ……………………………….. 39

3.5 Bogotá and its economic structure – conclusions .......………………….. 41 Chapter 4 Drivers of Economic Performance and Competitiveness ………..43 4.1 Mobility - Transportation ………………………………………………………43 4.2 Public safety ……………………………………………………………………48 4.3 Access to Housing ………………………………………………………….51 4.4 Education ……………………………………………………………………….56 Chapter 5 Institutional Environment for Competitiveness …………………….58

List of Figures Figure 1: Some Milestones of Bogotá …………………………………………… 7 Figure 2: Key Issues Emphasized by Bogotá Mayors 1988-2007 ……………. 8 Figure 3: Participations in the General Transfers System –SGP- …………….13 Figure 3A: Taxes collected by Bogotá …………………………………………..14 Figure 4: Intergovernmental transferences from the Nation to Bogotá Capital District ……………………………………………………………………………..15 Figure 5: Direct investment in Education in Bogotá (Millions of pesos)……….15 Figure 6: Direct investment in the Health in Bogotá (Millions of pesos) …….15 Figure 7: Composition of total resources of Bogotá …………………………….21 Figure 8: Composition of total expenses of Bogotá ……………………………21 Figure 9: Bogotá’s GDP composition by sectors in 2003 …………………….30 Figure 10: GDP Growth in Bogotá and Colombia 1990-2005 ………………….32 Figure 11: GDP per capita in constant US$ of 1994 …………………………….33 Figure 12: GDP per occupied person, 1999 and 2005 ………………….……..34 Figure 13: Employed population 1996-2005 ……………………………………35 Figure 14: Unemployment rate 1996-2005 ……………………………………….35 Figure 15: Unemployment Rates in Latin America, 2005………………………..35 Figure 16: Number of companies created and liquidated yearly, and net annual addition of firms in Bogotá 2000-2005 ….…………………………..36 Figure 17: Total Share of Bogotá-Cundinamarca region in the commercial flows of Colombia (imports and exports) during the period 1991-2003 ….…….36 Figure 18. Total Exports of Bogotá-Cundinamarca region during 1991-2003 ...37 Figure 19: Bogotá-Cundinamarca: Main 15 export products, sectors using CIIU (4 digits), average 1991-2003 ...……………………………………..37 Figure 20. Imports growth during the period 1991-2003 ……………………….38 Figure 21. Bogotá-Cundinamarca: Main 15 import products, sectors using CIIU (4 digits), average 1991-2003, Rev 2 …………………………………38 Figure 22. Main destinations of Bogotá-Cundinamarca region exports, average periods considered 1994-1998 and 1999-2003 …………………………39 Figure 23: Concentration of firms dedicated to higher education by locality ....40 Figure 24: Concentration of healthcare firms by locality ...…….……………40 Figure 25: Concentration of financial intermediation firms by locality ………….41 Figure 26: Concentration of firms dedicated to tourism by locality …………..41 Figure 27: Concentration of telecommunications, transportation, and storage firms by locality …..……………………………………………………41 Figure 28: Concentration of firms dedicated to retail by locality …..……………41 Figure 29: Transmilenio scope ……………………………………………………43 Figure 30: Coverage of bicycle route network ………….………………………44 Figure 31: Road network conditions in Bogotá 2005……………………………..44 Figure 32: State of the Network of roads by component in Bogotá 2005………45 Figure 33: Cost of transportation in Latin American cities……………………….46 Figure 34: Rates charged to international passengers, 2003 -Main Latin American cities ……………………………………………………………….47 Figure 35: Airport costs in Latin America, 2003 ………………………………….47 Figure 36: Homicide rate per 100,000 inhabitants in Bogotá……………………49 Figure 37: Number of Robberies in Bogotá, 1999-2004…………………………49 Figure 38: Homicide rates per 100,000 inhabitants in Latin America, 2005 …50 Figure 39: Housing Deficit in Bogotá………………………………………………51

Figure 40: Access to water in Bogotá 1993-2005………………………………..53 Figure 41: Sanitary sewage coverage in Bogotá 1993-2005……………………53 Figure 42: Perceptions of housing availability 2004-2005……………………….54 Figure 43: Office space rent prices in Latin American cities…………………….55 Figure 44: Apartment rent prices in Latin American cities……………………….55 Figure 45: Gross coverage rate of primary and secondary education………….56

List of Tables

Table 1: GDP by sectors in Bogotá 1990-2003 …………………………………..31 Table 2: GDP Growth in Bogotá and Colombia 1990-2005 ………………….32 Table 3: GDP per capita Bogotá, Antioquia, and Valle ………………………..33 Table 4: GDP Growth by service sector 1990-2003 (millions of constant 1994 pesos) ……………….………………………………..39 Table 5: Times of travel in Bogotá in minutes 2000-2005……………………….44 Table 6: Transportation and GDP in Bogotá, 2000-2005........................………47 Table 7: Km of Transmilenio routes and GDP of Bogotá ………………………48 Table 8: Transportation and occupied population in Bogotá 2000-2005……….48 Table 9: Transportation and firm creation in Bogotá 2000-2005………………..48 Table 10: Safety and per capita GDP in Bogotá, 1993-2005 ………………….50 Table 11: Safety and firm creation in Bogotá, 2000-2005 ………………………50 Table 12: Evolution of the housing stock in Bogotá 1988-2005…………………52 Table 13: Average area per unit of Low-Income Housing in Bogotá, 2001-2005 ……………………………………………………………...55

1

Executive Summary - Bogotá –

This report has been prepared under the guidance of World Bank Staff in a wider project dedicated to understand “Institutional Factors that Explain Performance in Three Key City Services: the case of four Cities in Latin America”. The project concentrates on the cases of Bogotá, Santiago, San Salvador and Sao Paulo. This report covers particularly the case of Bogota.1 Bogotá is a very interesting city case, despite its medium-low income level. Recently, Bogotá has gained some international reputation for a number of institutional innovations related to city management and public service delivery. The city has gained international awards and recognition in many areas, like public finance management, transportation, basic education, environment, local public libraries, among others. Bogotá has also gained attention for its accountability and performance evaluation systems run primarily by the private sector. The city has undergone numerous changes in many areas; some of those now serve as reference for other cities in Colombia and Latin America. Taking into account the recent innovations in Bogotá, The World Bank is interested in assessing the evolution of the city’s performance and economic growth and determining if Bogotá’s city growth and GDP per capita has changed significantly over the last two decades. The research question posed is to understand how relevant the provision of local goods has been for Bogotá’s growth; particularly, the provision of pure local goods, like transportation and mobility strategies, public safety, and availability of housing and public space.

The study also acknowledges the importance of institutional factors, such as fiscal and political decentralization schemes, metropolitan governance, zoning, and other laws and regulations that have an incidence on city growth. Although not very conclusive evidence is available on those grounds, there are some indications of the positive incidence of these public goods and institutional factors in city growth. Bogotá has 16% of the Colombian population and 22% of the national GDP; therefore, the ratio of GDP to total population is 1.375. This is still very modest if one compares Bogotá with Sao Paulo –a city that has 8.6% of population of Brazil and produces 36% of national GDP, resulting in a GDP to total population ratio of 4.20. On the other hand, Mexico City has 14.2% of the population of Mexico and 33.6% of National GDP. The above indicates that Bogotá has more expected opportunities for city growth in terms of GDP, pointing to the importance of studies that shed some light on the dynamics of economic growth within the city and the opportunities available.

Several authors note that productive interaction among people promotes innovations; innovations spur productivity and lead to increases in GDP. The

1 The report was prepared in Bogota, by Jorge Hernán Cárdenas S., Jorge Barriga and Johana Jimenez, and was

supervised by Mila Freire, Fernanda Ruiz, Ming Zhang, Fernando Rojas, Jonas Frank.

2

more qualified and connected people are, the easier it is for everyone to work, cooperate, trade, and communicate. All things being equal, Bogotá will have more “Knowledge spillovers” if the city is better prepared to provide opportunities for qualified interaction at a very low cost2. This is related to housing conditions, mobility costs and citizen safety. Therefore, the key question is to what extent people have the ability to interact productively in the city. Can people securely, comfortably, and rapidly congregate and work? Is the city taking advantage of economies of agglomeration? To what extent is there evidence that key pure localized public goods available in the city provide dynamic externalities that activate the engine for city growth? We need to examine the productive gains derived from the geographic concentration of industries and people. Is the city designed in such a way that people and the city extract more rents from the geographic interaction of industries? Some important questions come to mind in this regard: Does the city save resources because of good urban planning and zoning? Is the city providing needed public local goods that have the potential to expedite qualified interaction? Does Bogotá carefully create and distribute the burden of cost of shared infrastructure among many industries and among different generations? Does the city provide opportunities to increase the number of qualified people? Has the city reduced labor recruitment costs? Is the city committed to the reduction of transportation costs? Thus, there are numerous questions inquiring to what extent Bogotá is capturing all the benefits that come from agglomeration, and if the city is providing enough of the public goods that bring the positive externalities of city growth. Does the city present evidence of negative externalities associated with not very well planed city growth?

These are some key and inspiring questions for Bogotá that would allow the city to take a very different look at its development process. Not all of them can be answered in this initial study, due to limitations in time and available data. Yet, it is important to persevere in the area of understanding more carefully the dynamics of city growth. In this report, the authors decided to begin with the presentation of information related to Bogotá’s political and administrative decentralization and governance schemes. This is the subject of Chapter 1, and covers detailed information on how is the city organized. Chapter 2 presents some best practices of the city in areas as different as safety management, pubic finance, urban model, mobility strategy, management of public space, and basic education management strategies.

2 See for example, Mila Freire and Mario Polese, Connecting Cities with Macroeconomic Concerns: The missing Link.

Institute Nationale de la Recherche Scientifique. Montreal, Quebec, and The World Bank, 2003.

3

Chapter 3 presents information and analysis regarding Bogotá’s economic structure and city growth. Initially, sectors that have grown since 1990 and others that are eroding or diminishing their relative importance are presented. A very interesting point in Chapter 3 is to examine the geographic location of key industries, to see if there is any evidence of geographical concentration and productive agglomeration. Concentration is evident in sectors like retail, telecommunications, health, education, tourism, and financial intermediation; these last four industries exhibit high levels of geographic concentration, which could indicate their consolidation as clusters and the generation of cluster economies. Another important point of this chapter is to explain the relation of Bogotá’s economic cycle with that of the nation, and reaching one simple conclusion: Bogotá’s economy is clearly more volatile. In periods of national expansion, the city’s growth is higher than that of the country, while crisis are felt harder in the capital city than in the rest of the nation. There is no conclusive explanation of the reason for this phenomenon, but it is clear that this volatility notably affected Bogotá’s economy during the national crisis of 1999, when the city’s growth plummeted; there was an important reduction in productivity –measured in per capita GDP-, and an obvious increase in unemployment rates. Although the effects of the crisis are still visible, the recovery of the city’s economy since the year 2000 is evident, as demonstrated by the acceleration of productivity, the continuous decline of unemployment rates, and a consistent creation of new firms. An additional conclusion of Chapter 3 is that Bogotá is the most relevant city of Colombia in economic terms, since it makes the largest contribution to the National GDP and generates the most employment. Although the city’s industrial structure has not changed radically in the past 15 years, there is evidence of a gradual consolidation of Bogotá as a service economy. Service industries account for approximately of 77% of wealth creation in the city. In contrast with the industrial sector, services have increased their participation in the city’s GDP.

Once we acknowledge that the city is a service economy, we have to clearly conclude that human capital and human interaction is the main productive resource of the city, and the ease and efficiency of its use, as well as the improvement of its knowledge base, are the determinant factors for economic performance. Therefore, citizen safety and mobility strategies are fundamental for elevating the productive base of the city. The Transmilenio system of public transportation, the creation of a network of bike routes, as well as programs to dissuade the use of private automobiles, and measures to decrease the level of congestion –such as “pico y placa”- have all contributed to reduce the time of transportation and to promote the use of public transportation, while also improving the quality of life of the citizens of Bogotá. Approximately 80% of the passengers rely on public transportation, and the Transmilenio system has reduced transportation time by 32%. As a result, the city is more efficient with its human resources and promotes greater mobility

4

of goods and knowledge within. We expect these strategies undertaken by the city to have some incidence on growth. Although Transmilenio has achieved notable improvements in mobility within the city and it is cited internationally as an example of good practice, Chapter 3 also points out that the system faces important challenges in terms of transportation, since it must coexist with a traditional collective public transportation system which is disconnected from Transmilenio; the costs of maintaining two separated system is very high. Although there is still room for improvement in the area of citizen safety, there has been sustained progress over the past decade. The most important characteristics of its development at the institutional level include: (i) the Mayors´ leadership and the institutional organization they have assigned to the topic; (ii) the implementation of a public, reliable, useful, and credible information system; (iii) the advancement of programs related to citizen culture; and, (iv) the technical strengthening and the reinforcement of the infrastructure of the Metropolitan Police. Progress in issues related to safety has had a definite impact in the city’s performance, especially in three areas: foreign direct investment –FDI-, worker safety, and the sense of fully belonging and participating in all the city activities. FDI has increased over 128% during the past decade. In addition, relevant sectors for tourism such as hotels and restaurants have benefited from a greater influx of visitors to the city, as a result of a better perception of security. In addition, with greater safety and lower perception of crime it seems reasonable to think that the possibility for citizens to move around and enjoy the city calmly, allows firms to exhibit higher levels of productivity, due to reduced stress of the workforce, and a decrease in the levels of job absenteeism. An increase in safety also provides inhabitants with greater opportunities to interact with the service economy in commerce, restaurants, banking, and all of the service industry. A large part of Bogotá’s economy is based on the delivery of services, and some of these –such as hotels, restaurants, healthcare, and education- require close interaction with the client. When workers and consumers perceive that “the city takes care of them”, they have a greater disposition to interact together. In terms of access to housing, it is more difficult to reach conclusions in this research, especially due to the lack of prolonged time series that may allow some type of inference of its impact in the city’s performance. First, the reduction of the housing deficit solves a basic need –having a “roof”-, and frees people to direct their resources to the consumption of goods from other sectors, promoting growth. The reduction of the housing deficit has had a similar effect as that of increased safety in economic performance, since it creates appropriation of the city and improves the quality of life of its citizens. Second, it was only recently that the private sector decided to build low-income housing, thus reducing the participation of illegal builders. As a result, the city has saved critical resources, since the cost of providing public services and utilities to

5

illegal neighborhoods is, in average, 160% more expensive than doing so in a legally planned urbanization. Bogotá as capital district reports a series of milestones at the political, institutional, and fiscal levels, that have positively affected its transformation and development, converting it into a reference of good practices at the national and Latin American levels. Three key aspects include: (i) in 1945, the city became a district; (ii) in 1954, six neighboring municipalities were annexed to Bogotá, which improved the city’s governance, surpassing the territorial divisions. In that same year, the city was divided into zones administered by Local Mayors; and, (iii) the Constitution of 1991 granted the city a special status among all the municipalities of Colombia. The main institutional milestone of Bogotá, from the administrative point of view, is the popular election of mayors. Likewise, the increase of the mayor’s period of government from two to four years has promoted the development of long term plans and projects proposed in the campaign programs, independently from the President of the Republic and his political party. The Organic Statute of Bogotá (Law 1421 of 1993) -adopted after the Constitution- clarified the competences and limits of key actors, like the city council and the mayor and his cabinet. From the political standpoint, the redefinition of the relations between the City Council and the Mayor stands out. These are now centered on the search of greater transparency and stronger institutions, aiming to increase governance and giving priority to the common interest. Thus, the City Council has become a regulatory organ instead of a co-administrator of the city. On the other hand, national fiscal transferences to the city provided more stability to local public finance and increased resources for the city. Finally, the localities require further reform, since some authors argue that those units lack clear functions. From the institutional standpoint, although the city has made progress in the decentralization process, Bogotá still faces important challenges for its future evolution, among them: (i) the coexistence of functions between the Mayor and the City Council related to the organizational structure of the city government; (ii) the localities are defined as administrative entities which lack practical meaning for the citizen; and, (iii) the Local Mayor Offices in each of the 20 localities of Bogotá are not recognized as entities, and the functions assigned to the local mayors in terms of planning, and execution are restricted.

6

CHAPTER 1

DECENTRALIZATION IN BOGOTÁ

“Like many large Latin American cities, in the past decades Bogotá has undergone numerous demographic and spatial changes. In the past half century, the city’s population multiplied by a factor close to ten, growing from 750,000 inhabitants in 1951 to close to seven million at the beginning of the twenty-first century. The constructed area grew somewhat less rapidly in these decades, from approximately 4,000 acres in the beginning of the 1950s to close to 29,000 in 1996… in 1990, the city housed nearly one third of all the automobile dealers, financial and business services establishments, close to two fifths of real estate agencies, and one fourth of the country’s educational and health establishments (Gouëset, 1998). In 1998, Bogotá produced 20% of the country’s GDP, 25% of the national manufactured value added, and even larger proportions in sectors such as communications and finance (Cuervo, 1992)”3. Figure 1 shows a number of political, administrative and financial milestones in the city’s life. Bogotá was the Nation’s capital and capital of the Department of Cundinamarca by 1905. In the Constitutional reform of 1945, the city becomes a District. Six new municipalities are annexed to the city in 1954, creating only one metropolitan authority for the whole city. The neighboring municipalities annexed to the new territorial entity, the Special District of Bogotá, were: Suba, Usaquen, Fontibón, Engativa, Bosa, and Usme4. The first popular mayor election is held in 1988. Successful privatization of garbage collection is attained in 1989, which was important in allowing more private participation in the public utilities of the city, such as energy in 1997. A new Constitution is sanctioned in 1991; as part of the development of the Constitution, the new Organic Statute of the city –which defines fundamental rules of Bogotá’s governance-, is issued in 1993. In 1995, successful programs are launched to promote and build citizenship culture --“hora zanahoria”, “respect of the pedestrian”, and many others-- that immediately gain popular acceptance. The company in charge of electric energy is capitalized in 1997, avoiding a financial crisis, and launching the presence of a strategic and experienced private manager operator, which holds 49% of the company’s shares and controls energy generation (Engesa) and distribution (Codensa). The Transmilenio model of public transportation and the school concessions begin in the year 2000. The Plan for Territorial Ordainment is defined in 2002 and new social programs -such as “Bogotá without Hunger”, among many others- are launched in 2003. One could say that modern Bogotá has been built from all these very complementary and indeed different experiences. Since the popular election of City Mayor in 1988, each administration has brought different questions and different emphasis to the city; all of them have added a net gain to the city.

3 Cepeda, Ulloa Fernando, compiler. Las Fortalezas de Colombia. Inter American Development Bank, IADB. Bogotá,

2004. p. 418 4 Decree No. 3064 of 1954, which develops the Constitucional text of 1945 and allows the conformation of Bogotá as a

Special District.. In: Ordóñez Matamoros, Gonzalo. Alcaldía Mayor, Universidad Externado de Colombia. p. 40-41

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9

Two particular historical facts, the category of district reassured to the city in 1945, and the annexation of the six municipalities in 1954, are important milestones which allowed the city to act in an integral way, surpassing territorial divisions, and providing a special framework for action. A historical curiosity is that the annexation of the neighboring municipalities to Bogotá in 1954 was an autocratic decision of the “state of exception” during the government of General Rojas Pinilla, the only government that was not democratically elected in the past century. “Bogotá stands out in comparison with other large Latin American cities, for having excellent natural resources, and also because the city has been governed almost completely for more than 50 years with only one administrative entity”5. This situation offers obvious advantages, since it limits the clash of competencies among territorial entities, and poses the conditions for greater coordination in government functions; thus, the city can assume the production of metropolitan goods with greater leadership. This is true in the case of metropolitan transportation, major public investment like the provision of local public goods, and public utilities. Moreover, the Legislative Decree 3640 of 1954, issued under “estado de sitio”, is important because it defines Bogotá as a Special District, not subject to the ordinary regime of municipalities. Later, the Constitution of 1991 (Chapter 4, articles 322 to 327) reinforces this special regime of Bogotá, which theoretically grants the city greater prerogatives, not all of them already regulated or exercised. Figure 2 highlights some of the key programs or strategies undertaken by the past six city administrations. It has been fortunate for Bogotá that all of them added relevant dimensions for city progress and city growth. Some of these key ideas later prove effective for the city. More than one good and inspired administration, one could easily say that after popular election came into place, Bogotá has had several good and proven administrators, some coming from the political arena, and others from academia. For the past 20 years, city mayors have continued the legacy of city reform and city modernization. As noted in Figure 2, the period of mayors has passed from two to three years, and finally, after 2002, the period increased to four years.

1.1 Administrative Decentralization

The central sector of the administration consists of the mayor’s office, with its Secretaries and administrative departments. The decentralized sector consists of: (i) the public establishments, whose function is to execute specific investments in different sectors; (ii) the Industrial and Commercial Enterprises, dedicated mainly to the delivery of public utilities, and whose income is derived

5 Op. Cit., Cepeda, Ulloa Fernando. p. 428

10

from the tariffs charged for such services6; (iii) the Public utilities; (iv) the Social State Enterprises, consisting of 22 hospitals; (v) the Public Societies; and, (vi) the Transportation Terminal as a society of mixed economy7. At the central level, the collegiate instance is the City Council, supreme authority in the district, with normative authority and authority for exercising and demanding political accountability of the administration. Other functions are: holding meaningful debates for the city and approving the development plan at the beginning of each administration. The City Council is also responsible for approving local taxes and the city annual budget. The Council consists of forty council members (“concejales”), elected by popular vote for four year periods8. With the expedition of the Organic Statute of Bogotá in 1993, the city confirmed its 20 localities. Local mayors are named by the City Mayor, who selects from a list of three candidates proposed by the Local Administration Boards –JAL. This is a post of discretional appointment and removal by the City Mayor. Local mayors´ offices are the administrative bodies of localities9. At each of the 20 localities of Bogotá, the Junta Administradora Local –JAL-, are the collegiate instances, formed by “ediles”, who are elected by popular vote on the same day as the council members, and who are empowered to distribute and assign the sum of money assigned to each locality in the yearly budget. The division of Bogotá in 20 localities did not obey to a precise territorial division in the context of decentralization, nor was it done according to careful study. Fundamentally, as one of the mayors involved notes “although they were not defined with the purpose of converting them into localities, and almost certainly they do not correspond to the definition of localities, …, (the fact is that) people already identified them, knew their limits, and accepted them, and therefore, Agreement 2 of 1992 … adopted these 20 localities”10. Some district administrations have considered it important to work at the level of locality, while others consider it less functional to work with these instances and actors arguing that resources could be dispersed and that it is not clear if it could help city governance. The decentralization process of Bogotá poses important challenges at this level. An expert in city topics noted the following with respect to the fragility of the organization at the locality level:

6 Rojas Lopera, Alexandra ; Gutiérrez, Javier Alberto. Descentralización fiscal y financiamiento de la inversión en

Santafe de Bogota D. C. 1990 – 2001. Secretaría de Hacienda, Alcaldía Mayor de Bogotá. Santafe de Bogota, January 1999. 7 “Estatuto orgánico de Santafé de Bogotá, D.C.”. Decree 1421, 21 July 1993. Colombia. Santafé de Bogotá: Alcaldía

Mayor, 1993. Title IV. Government and Administrative Organization, p. 22 8 Op. Cit. Ordóñez Matamoros, Gonzalo, p. 268

9 Usaquén, Chapinero, Santa Fé, San Cristóbal, Usme, Tunjuelito, Bosa, Kennedy, Fontibón, Engativá, Suba, Barrios

Unidos, Teusaquillo, Los Mártires, Antonio Nariño, Puente Aranda, La Candelaria, Rafael Uribe, Ciudad Bolívar, and Sumapaz 10

Castro, Jaime. La descentralización es política. Documento presentado en: La descentralización en Bogotá: Últimas cuatro administraciones dialogan con la administración de Luis Eduardo Garzón. Evento del proyecto Hacer público lo público, mayo 4 de 2005, Cámara de Comercio de Bogotá. Proyecto interinstitucional desarrollado por: Fundación Corona, Personería de Bogotá, Universidad Nacional de Colombia.

11

i) “The lack of definition and the inconsistency between the functions assigned to localities and the attributions and resources effectively assigned to them.

ii) The “municipalist” framework tends to be replicated in localities, without

seriously considering the existing differences between the global city ambit and the specific locality environment, …, and

iii) The lack of formal organization for local mayors´ offices and the

concentration of decision-making in local mayors, with few if any possibilities to delegate to people who report to them…;

iv) The greater part of the present localities has more than 350,000

inhabitants, with a socio-economic heterogeneity similar to that existing in any large municipality of the country. Such size and heterogeneity make it very difficult to achieve an identity, which in turn makes the processes of “citizen formation” and “collective learning” difficult to achieve".11

In summary, Bogotá is a model in the organization of the offices of the City Mayor, and has attained important achievements, but these results are less clear at the level of local mayors´ offices and their twenty localities.

1.2 Political Decentralization

The election of Mayors by popular vote beginning on 1988 represented a notable change in the life of the city. Having fixed periods for the mayor and the existence of a programmatic vote –which forced candidates to present their government plan during the campaign, and to comply with it- were large accomplishments. In addition, the Constitution of 1991 created the possibility of revoking the mandate, as a way to return power to the citizen and to make him/her more active in following-up on the administration. Since then, the importance of mayors has grown. The period of government has increased from the initial two years in 1988, first to three years as a development of the New Constitution of 1991, and recently to four years, as a result of a constitutional reform, the Legislative Act 02 of 2002. This is a clear and positive indicator of the affirmation of municipal culture in the country. Lengthening the period of government has facilitated the development of plans and projects of greater scope and longer reach. Another accomplishment of the popular election of mayors and the introduction of the ballot card (tarjetón) was that it allowed candidates with opinion vote, but without political machinery, to reach this important position. This has attracted to politics individuals who know the city well, and who are in general better qualified to represent the electorate, than several previous mayors (Dávila and Gilbert, 2001; Pizano, 2003) 12. An

11

Silva Bautista Jaime. In: La Descentralización en Bogotá: Una visión prospectiva. Fundación Corona. Bogotá. 2000. p. 13 12

Op. Cit., Cepeda, Ulloa Fernando. p. 428

12

additional interesting aspect brought on by the popular election of mayors was their greater independence in relation to the political affiliation of the President of the Republic. Since 1988, only two of the seven City Mayors of Bogotá have belonged to the same political party as the President of the Republic, two have declared they are politically independent, and the present mayor belongs to a coalition of leftist parties, with a very different political affiliation from the President13. Before the Constitution of 1991, the political relations of the city were characterized by a certain subordination of the Mayor to the District Council14. The Constitution established a prudent period of time to issue the special regime of the Capital District. In June 1993, two years after the approval of the Constitution, the Organic Statute was issued by means of a Decree-Law, and established clearer and more transparent institutional parameters to rule Bogotá15. The Organic Statute had a direct effect in the political relation between the central administration and the City Council in several respects, among which are the following: (i) the city council members are paid daily fees for their work, up to 20 working days per month, never exceeding the salary of the mayor; (ii) members of the city council are not allowed to participate in any board of district entities, clearly separating them from direct involvement in executive affairs; (iii) localities and their boards –JAL- are better defined, with clearer functions; (iv) the functions of the City Mayor and the City Council are better defined, specializing each actor and avoiding the invasion of competences16. The Statute eliminated the Council’s interference in administrative aspects, especially by prohibiting the participation of council members in the Boards of district companies17. Moreover, the Statute eliminated a certain dependence of the recruiting system of high level personnel and the council members, and introduced a re-definition of planning processes to increase transparency, visibility, and public responsibility18. 1.3 Fiscal Decentralization Articles 356 and 357 of the Constitution of 1991 –later developed by Law 60 of 1993- redefined a scheme of automatic transfer of current income of the national government to the territorial entities. Many said that with these articles, the Colombian Constitution was clearly very municipally oriented. These intergovernmental transferences have a strong component of redistribution, transferring proportionally larger resources to the poorer territorial entities19.

13

Ibid, p. 427 14

Medellín, Torres, Pedro; Valdavieso, Llanos, Carlos. “Tendencias y contratendencias en las prácticas políticas en Bogotá”. In: Rico de Alonso, Ana. (Ed.). Bogotá, Sistema político y cultura democrática. Seminario Internacional. Alcaldía Mayor de Bogotá. Bogotá, 2003. p. 125-127 15

Merchán Álvarez, Rafael. “Los retos de la gobernabilidad en Bogotá”. In: Op. Cit. Rico de Alonso, Ana. p. 139. 16

Guzmán Pardo, Tania. “Prácticas políticas y relaciones Ejecutivo-Concejo: anotaciones sobre el caso Bogotá”. In: Op. Cit. Rico de Alonso, Ana. p. 153 17

PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 2004, p. 30- 18

Op. Cit. Guzmán Pardo, Tania, p. 151 y ss. 19

Acosta, Fainboin, Gutiérrez, and Zuluaga. In Relaciones fiscales entre el Distrito Especial de Bogotá y la Nación. Fedesarrollo. P.151

13

Law 60 of 1993 conferred a differential fiscal treatment to Bogotá, recognizing its double condition of municipality and Special –now Capital- District. Since then, and later with Law 715 of 2001, the city has received transferences from the Nation due to this joint character –municipality and Capital District-, and has been able to collect taxes of municipal20 and departmental21 competence, as well as having participation in some resources of the Department of Cundinamarca22. The General System of Transfers (Sistema General de Participaciones –SGP-) assigns transfer resources, giving priority to expenditure in education and health care, especially for coverage, as shown in Figure 3. Figure 3: Participations in the General Transfers System –SGP-

Participations in the

General Transfers System

Special Assignments 4% Distribution by Sectors 96%

School Meals (municipalities and

districts 0.5%)

Riverside- Magdalena River

(municipalities and districts 0.05%)

Territorial Pension Funds(municipalities, districts, and

departments 2.9%)

Indian Reserves (Indian

population in reserves, 0.52%)

General Purpose (municipalities

and districts, 17%)

Education (municipalities, districts,

and departments, 58.5%)

Health care (municipalities, districts,

and departments, 24.5%)

Public Health (municipalities,

districts, and

departments)

Subsidized

regime (municipalities

and

departments)

Poor population not

affiliated to the

subsidized regime (municipalities, districts,

and departments)

Source: Introducción a la Economía Colombiana. Mauricio Cárdenas Santa María. Alfaomega – Fedesarrollo. Bogotá, 2007, p. 216

By constitutional reform (Act 01 of 2001), Law 60 was substituted by Law 715 of 2001, which created the General System of Participations –SGP-, composed of the addition of the resources of the two sources: “situado fiscal” and the “municipal participations”.

20

Como municipio Bogotá recauda recursos por el cobro de los siguientes impuestos: Predial, Industria Comercio y Avisos y Tableros, Unificado de Vehículos, Delineación Urbana, Azar y Espectáculos Públicos y la Sobretasa a la Gasolina y el ACPM motor. 21

Como Distrito Capital Bogotá recauda recursos por el cobro de los siguientes impuestos: Consumo de Cerveza Sifones y Refajos y Consumo de Cigarrillos y Tabacos elaborados de procedencia Nacional y Extranjera. 22

La participación en el recaudo de los impuestos departamentales de Cundinamarca es en los impuestos de: el consumo de cigarrillos elaborado de procedencia extrajera y nacional, Registro y anotación

14

Figure 3A. Taxes collected by Bogotá National Departmental District (Bogotá) Municipal

1. Sales Tax (IVA) 2. Income tax

(Renta) 3. Retention at the

source (Retención en la fuente)

4. Equity (Patrimonio)

1. Vehicles 2. Liquor and beer 3. Tobacco 4. Registry (De

registro y anotación)

1. Building (Predial) 2. Vehicles 3. Industry and Commerce (ICA) 4. Urban delimitation

(Delineación urbana) 5. Lotteries and entertainment 6. Gasoline Tax (Sobretasa a la

gasolina) 7. Publicity (Publicidad exterior

visual) 8. Tobacco 9. Beer consumption 10. Appreciation (Participación en

la plusvalía) 11. Tobacco consumption* 12. Registry (De registro y

anotación)* *Participation in taxes collected by the Department of Cundinamarca

1. Building (Predial) 2. Vehicles 3. Industry and

Commerce (ICA) 4. Urban delimitation

(Delineación urbana)

5. Lotteries and entertainment

6. Gasoline Tax (Sobretasa a la gasolina)

Summing up, Bogotá receives the following direct transferences from the Nation: mainly from the General System of Participation; But also from the co-financing funds, from the yielded rents (lotteries and permanent bets), and from the Solidarity and Guarantees Fund –FOSYGA- destined for health services. Additionally, the city receives resources from the National Regalías Fund23. Bogotá received between 7.5% and 8.7% of the total amount transferred by the Nation between 1994 and 1997, compared to less than 7% of the total in 198824. The transference regime is not exempt of risks in the future. As mentioned in 2001, the national government promoted congressional approval of a constitutional reform to decelerate the inertial growth of transferences, which risked exceeding the country’s fiscal stability. The reform stated that during the period 2002-200825, the transferences would only grow in a percentage equal to the inflation, plus an additional 2% at the beginning and later 2.5%, instead of automatically increasing at the rhythm of growth of the current income of the Nation, as had been happening. The constitutional reform also stated that the system would return to the initial model in 2008, once the transition period ended. At present, the country is expecting a new Constitutional Reform to extend the period of transition. As a result of the constitutional reform of 2001, transferences amount to 31.9% of the Nation’s current income in 200726, down from 47.4% in 2002. That is, in 2008, the nation will transfer 17 billion pesos less (using the value of the peso in 2006). Despite this adjustment, up to this point, Bogotá received increasing rents due to transferences, as can be observed. Despite of the current concerns, one could say that up to 2006 the stability that of this revenue source

23

Taken and modified from Acosta, Fainboin, Gutiérrez, and Zuluaga. Op. Cit. P. 147 24

Op. Cit. Acosta, Fainboin, Gutiérrez, and Zuluaga. P.151 25

Legislative Act 01 of 2001. 26

Presentation of the District Secretary of Finance in a work table promoted by the “Bogotá Cómo Vamos” on 28 March, 2007.

15

has been very positive for the city and allowed the city to improve its education and health systems in the previous years. What could happen in the years to come remains an open question.

Figure 4: Intergovernmental transferences from the Nation to Bogotá Capital District

1/ Corresponds to 11/12 of period validity + 1/12 of the previous period, includes the 10% value sent to FONPET

Source: Secretary of the Treasure

Figure 5: Direct investment in Education in Bogotá (Millions of pesos)

Source: Budget Spending

Figure 6: Direct investment in the Health in Bogotá (Millions of pesos)

Source: Budget Spending

1993-1991, under Law 60

2002-2005,

under Law 715

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

900.000

1.000.000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

With national transferences T. Nación

With local resources

0

100.000

200.000

300.000

400.000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

With national transferences T. Nación

With local resources

500.000

16

Moreover, the Nation relies on Bogotá to collect the following taxes27: income tax, sales tax, internal and external tariffs, contributions to social security in health, and the payroll contributions directed at ICBF and SENA. In net terms, between 1994 and 1998, the District transferred resources that amounted to 23.9% of the district GDP, in average. In 1998 alone, the District transferred $7.3 billion in net terms, which represent 23.6% of its GDP28. According to Fedesarrollo29, the present design of intergovernmental relations at the national level and at the level of Bogotá-Nation, must be reconsidered in terms of equity and efficiency in the handling of resources. Efficiency may be endangered because the present framework does not reward fiscal effort; this could promote fiscal laziness and give rise to enormous differences in taxes among regions. In addition, important efficiency costs may arise and consequently, growth and development costs, in cities like Bogotá where economies of scale and economies of agglomeration are more widely exploited, and from where important resources are extracted to be transferred to smaller cities. Finally, the design of the system of transferences may exhibit information problems, and discriminate against Bogotá for this reason. Because it is based on forecasts of several economic and quality of life variables (such as GDP, NBI, population, etc.), the system may not adequately reflect the fact that some of these variables exhibit different dynamics in some periods –they grow more rapidly in large cities than in small ones-. In addition, the system does not take into account the positive externalities that Bogotá produces for the rest of the country –such as providing education for the youth of neighboring municipalities- and which should be compensated for by the Nation. The timely acknowledgement of the differential evolution of economic and social variables of Bogotá, and of the positive externalities it generates, should be translated into greater transferences towards the city. Presently, the Congress of the Republic is studying a new Project of Law to modify once again the system of transferences to the regions30; the reasons for change continue to be the same as in 2001: the fiscal deficit of the Nation and the desire to strengthen central government. This new project consists on maintaining the growth of the General System of Participations indexed with inflation plus a few additional points -4 in 2008 and 2009, 3.5 in 2010, and 3 additional points from 2011 to 2020. If this project were approved, Bogotá would receive 5 billion pesos less in the next five years31. This situation would represent a certain degree of punishment for a city that handles its resources efficiently, as well as a certain cost in terms of equity, given its important role as recipient of displaced population in conditions of vulnerability. These issues of great political importance for the city require study and follow-up.

27

Idem149 28

Idem. 151 29

Idem. 161 y 162 30

Acto legislativo 011 de 2006, aprobado por la bancada uribista en primer debate, en la Comisión Primera del Senado 31

“Un año entero sin inversión”. En el Tiempo. Bogotá 29 de marzo de 2007. p. 1-21

17

1.4 Citizen participation and social control

“Bogotá has several scenarios and spaces of participation… such as the Local Planning Councils, the Committees for Community Participation in Health, the Social Policy, Local Councils, the Citizen Veedurías for transparency in the management of any aspect of the city, committees for development and social control of public utilities, and many others”32. According to some authors, “the District has not had the political will or an integral strategy to promote participation. There has not been a real policy of participation”33. On the other hand, it is relevant to highlight several private sector led institutional experiences promoted directly to advance greater citizen knowledge of the city’s central administration and of the behavior of the city council. Projects such as “Bogotá How Are We Doing” (“Bogotá Cómo Vamos”) and “Council How Are We Doing” (“Concejo Cómo Vamos”), undertaken by a three-party alliance between Casa Editorial El Tiempo (Bogotá’s major news group, with investments in newspaper, TV and magazines), the Bogotá Chamber of Commerce, and the Corona Foundation. “Bogotá, Cómo Vamos” is a very powerful project created in 1988, to promote accountability of the Capital District administration. “It is an exercise of periodic and systematic follow-up of the changes in quality of life, with emphasis on the Administration’s fulfillment of the Development Plan and the basic indicators previously agreed upon with the District Administration”34. The project “Concejo, cómo vamos” also contributes to the review of the institutional performance of the Bogotá City Council, with emphasis on the follow-up of attendance and permanence of council members in the council sessions, and on the study of initiatives promoted by each council member, as well as the most recognized projects. Its main contribution consists on providing voters with elements to evaluate the role played by their representatives and by the Council as a corporation, in the advancement of a shared project for the city35.

32

Mayor’s Office of Bogotá. Available on the Internet: http://www.bogota.gov.co 33

Velásquez C. Fabio et al. Op Cit. Pp. 7 and 8 34

“Bogotá, Cómo Vamos”. Available on the Internet:: http://www.bogotacomovamos.org 35

“Concejo, Cómo vamos”. Available on the Internet: http://www.concejocomovamos.org

18

CHAPTER 2

BEST PRACTICES IN BOGOTÁ AS A RESULT OF DECENTRALIZATION

Since the beginning of the decade of the nineties, Bogotá presents significant advances in the improvement of the quality of life of its inhabitants, as shown by the important international acknowledgements received by the city in different areas. Clearly, innovation and the continuity of policies, as well as the configuration of public-private alliances for the delivery of public goods, have favored the development of a set of best practices of local governance36. Among them, we will review six areas in which the city shows significant progress: (i) safety and citizen security; (ii) efficiency in public finance management; (iii) development of urban planning and a long-term urban city model; (iv) Transmilenio and mobility strategy; (v) recovery of public space; and, (vi) the revolution in education management. 2.1 Design and Implementation of an Integral Policy for Safety and

security Since the decade of the nineties, violence and delinquency in Bogotá have been significantly reduced, as shown by the decrease in the number of homicides, which fell from close to 80 for each 100,000 inhabitants in 1993 to 22.6 per 100,000 in 200437. This improvement may be attributed in part to an integral security policy set forth in 1995, in response to the responsibility assigned to Mayors by the Constitution of 1991 as first authority of the municipality, made responsible for maintaining and re-establishing public safety38. Some of the most important characteristics of the security policy set in motion in Bogotá are the following: The Mayor’s leadership and the institutional and administrative organization created for the matter. The Under Secretary for Security and Citizen Safety, created in 1997, advanced concrete actions of design, execution, and follow-up of the policy for safety and security39. In addition, instances for coordination, analysis, data gathering, and decision-making in terms of safety like the District Security Council, were systematically used. At the local level, the Local Security Council was the instance in charge of coordination of this agenda at the lower level. The use of specialized information systems. The Unified Violence and Delinquency Information System (SUIVD) was put in place, and became a proactive and useful tool40. The system helped to identify risk factors and was

36

In 2002, the United Nations Development Program –UNDP-, identified the experience of Bogotá as one of the best practices in local governance and urban development. The Regional Project of Local Governance for Latin America documented the experience in the book “Una Experiencia Innovadora de Gobernabilidad Local”. 37

Acero Hugo, Ex subsecretario de Bogotá 1995 – 2003. En artículo “Cómo Bogotá pudo mejorar su seguridad” 38

Estas facultades fueron desarrolladas por la ley 4 de 1991 39

PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 1994, p. 70 40

The information system receives information from the Metropolitan Police, the Legal Medicine and Forensic Sciences Institute.

19

very useful to address the specific risk factors in every area of the city and to correct the formulation of strategies when needed. Some programs and projects for policy implementation, such as weapon control and alcohol consumption were a direct result of this information system41. The implementation of programs related to citizen culture and to a culture of security. The following programs stand out: citizen participation in the Local Security Groups, which promote coexistence and safety; the creation of “civil guides”, to advance citizen controlled activities of respect for the public space; the implementation of a disarmament program that restricted gun control in the city in different time periods; programs to reduce alcohol consumption and promote responsible consumption; the “Hora Zanahoria”, which restricted the times of sale of alcoholic beverages in public establishments; “Hand the keys” (“Entregue las llaves”), a program to avoid drunk-driving; and, the recovery of deteriorated urban areas, adopting the theories of “zero tolerance” 42 and “the broken window”43, that had been applied successfully in New York by Mayor Rudy Giuliani.

Technical and infrastructure strengthening of the Metropolitan Police. In the past decade, there has been an unprecedented increase of investment by the city administrations in resources for the police44. In addition, there have been several efforts to bring the police closer to the citizens, such as the creation of communitarian police and the safe zone program to promote a culture of security practices in neighborhoods. The results of all of these strategies were unprecedented advances in crime prevention and a dramatic reduction of homicide rates that will be shown later in the document.

2.2 The efficiency of public finance management45

In 1992, the city faced a critical economic situation. The generation of resources was very low and the city had a high level of debt46. The promulgation of the Constitution of 1991 and the issuance of the Organic Statute of Bogotá provided an opportunity to transform the fiscal aspects of the city. Now, the city is able to finance a substantial part of its investments with its own resources. Moreover, the city’s debt has received AAA investment grade from Duff & Phelps Credit Rating Co.

41

The majority of violent deaths in Bogotá occurred at night, especially during weekends. Almost half of deadly victims of traffic accidents registered high levels of alcohol in their blood. 42

Theory proposed by United States criminologists Wilson and Kelling two decades ago. See: Wilson and Kelling 1982, Skogan 1990, Kelling and Coles 1996. BID, Sede Buenas Practicas del Departamento de Desarrollo Sostenible, La caida del crimen en Bogotá; Una década de políticas de seguridad ciudadana. 2004 43

El volcamiento del control policivo hacia las infracciones menores con miras a prevenir la comisión de delitos más graves. BID, Sede Buenas Practicas del Departamento de Desarrollo Sostenible, La caida del Crimen en Bogotá; Una década de políticas de seguridad ciudadana. 2004 44

In the past decade, the district’s investment in the metropolitan police has tripled in real terms, from less than US$ 16 million to over US$ 46 million. Ibid p. 45

The city’s finances consist of three large groups: the central administration, public establishments, and Industrial and Commercial District Enterprises. 46

Secretaría de Hacienda Distrital. Serie de Estudios de Economía y Ciudad. Rojas y Gutiérrez. Descentralización Fiscal y Financiamiento del la Inversión en Santa Fe de Bogotá D.C. 1990-2001. Bogotá 1999, p15

20

This gradual process of fiscal recovery was mainly due to the possibility provided to the city by the Organic Statute of issuing its own norms, which led to increase the generation of resources directed at sustainability. In addition, the city administration created a model for healthy public finances, and defined its level of expenditure mainly according to its payment capacity47. Some concrete results are presented below: Implementation of a series of strategies for long term sustainability. Fiscal recovery was attained through the strengthening of sources of tributary income: creation of new taxes, modification in the collection of existing taxes, and widening the base for taxing, all of which led to an increase in tributary income collected by the Central Administration from 1.46% in 1994 to 2.7% of GDP in 200348. Local taxes started at a level of US $200 in 1993 and ended the decade with a level of US$750. The following stand out among tax reforms: the establishment of self-valuation as the basis for payment of property taxes, the tariff increase and the modification of period of collection of the Industry and Commerce Tax to every two months, the introduction of a payment for capital gains due to constructions (plusvalia), and the gasoline tax are some of the measures introduced in the city. In parallel to the recovery of income, several public entities were liquidated, capitalized, and restructured, to rationalize operating costs. Thus, operating costs passed from representing 45% to 30% of the total49, mainly through: capitalization of the Bogotá Electric Energy Utility and the search of a partner for its two strategic investments CODENSA (distribution) and ENGESA (electricity generation); liquidation of the Industrial and Commercial District Enterprises, such as the Public Utility District Enterprise for Refuse Collection –EDIS- and outsourcing its services and the restructuring of public entities such as the Secretary of Public Works and the Secretary of Transit and Transportation. Tributary and budgetary strengthening of the administrative organization. Modernization of the Direction of Taxes and the merging of the District Treasury with the Secretary of Finance favored rationalization of the city’s tax structure and evasion control. The creation of the Economic and Fiscal Policy Council –CONFIS-, the introduction of the Budget System, the Yearly Cash Program for fiscal programming, and the Expenditure Agreement, among others, also contributed to budget modernization and to transparency in fiscal management. The development of a greater tax culture among citizens is another result that stands out, thanks to the efforts of city administrations to increase consciousness of the importance of paying taxes for the city’s benefit. The voluntary tax campaign is a very telling example of the progress in tax culture and of trust in the public investments of the District Administration: “nearly 63,000 persons paid an additional 10% of housing tax or industry and

47

Vargas Cesar. Diagnóstico “Las Finanzas de Bogotá: El punto de Partida”. Versión preliminar para discusión. Bogotá, 2006 p.1 48

Idid. p. 1 49

Ibid p. 41

21

commerce tax, most of who decided very freely to destine their additional contribution to social investment programs among several options”50. Figure 7: Composition of total resources of Bogota (current income, national government transferences, credit, other capital resources, and transfers of cash from public utilities of the city and other local investments)

Source: Bogotá’s Secretary of the Treasury

Figure 8: Composition of total expenses of Bogota (current expenses, debt service, bond payments, and other local investments)

2.3 Definition and development of a long term urban city model “The history of planning in the city dates back to the second half of the twentieth century and consisted of diverse attempts to order and guide physical growth with instruments used in varying degrees, such as road plans, definition of land use and density, designation of public spaces, and plans of spatial ordering. Nevertheless, these efforts did not necessarily think of the city as a whole, with the required complexity, information gathering, and integral vision that a plan requires”51.

50

En PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 2004, p. 4 51

Op. Cit., Cepeda, Ulloa Fernando. p. 433- 434

22

The Constitution of 1991 gave territorial entities the power of territorial ordainment and ordered the definition of a Territorial Ordainment Plan. In Bogotá, this plan was defined in 2002, in accordance to the Law of Public Ordainment at the national level (Law 388 of 1997). This fact, in addition to the political leadership of the Peñalosa (1997-2000) and Mockus (2000-2003) administrations52, was used by the city to define a “city model centered on the construction of public spaces for coexistence” 53 in the short, medium, and long term. As a result, Bogotá experienced a notable process of urban transformation. As a result of this model54, “Between 1998 and 2002, more than two million square meters of public space were constructed; hundreds of parks were built and refurbished; 270 Km. of bicycle routes were constructed; over 10,000 elements of public property were installed; more than 135,000 trees were planted. Public buildings of great social and architectural interest were built, such as: libraries, schools, a district jail, and the district archive”55. The recovery of public space contributed to the development of a new, more committed urban culture, more conscious of the value of public space, and more willing to defend it. Public attitudes towards public space in Bogotá underwent profound changes in the past decade. The development and recovery of public space formed a new citizen ethics, which is more attentive to, and vigilant of the progress attained, and more ambitious in terms of new projects in this field, all of which has permitted the construction of a new “culture of what is public” in Bogotá. In addition to the recovery of public space, rules issued on the use of land in the Ordainment Law and in Agreement 190, promote a more efficient management of the use of land, with greater private participation in management and greater public coordination.

2.4 Mobility Strategy

Transmilenio. “By putting in service Transmilenio, the District Administration assumes anew its responsibility for planning, organizing, and controlling public transportation”56. “Transmilenio is an ambitious and articulated public-private system which contains an infrastructure exclusively for buses, an organized operation, completely electronic and centralized payment collection, and a business structure for its operation and control”57. The system has received international recognition; it has been studied and copied by several cities nationally and internationally. Transmilenio has

52

Según Martin y Ceballos (2004), “El cambio observado en Bogotá no fue la consecuencia automática del proceso de descentralización en marcha desde los años ochenta, sino del liderazgo de los alcaldes Mockus y Peñalosa”. Bogotá anatomía de una transformación, Políticas de seguridad ciudadana 1995-2003, p. 266. 53

PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 2004, p. 112 54

Los componentes del modelo que hacen referencia a la estructura y manejo del espacio público son: movilidad, espacio público, vivienda, mejoramiento integral, renovación urbana y proyectos estratégicos. Ibid p. 115 55

Martín y Ceballos; Bogotá anatomía de una transformación, Políticas de seguridad ciudadana 1995-2003, p. 264 y 265. 56

PNUD. Programa de Gestión Urbana, Programa para América Latina y el Caribe. “La transformación de Bogotá, redefinición urbana y espacial” Quito, Ecuador, 2003. p. 35 57

PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 2004, p. 120

23

achieved notable improvement in the city’s mobility, in accident reduction, and in the reduction of air pollution. The Transmilenio model distributes very clearly the different key functions: the local government provides all the infrastructure of main routes, stations, workshops and complementary infrastructure-, the regulatory framework, and manages the contract. The private sector participates in fee collection –equipment, fee cards, fiduciary management-, and in the operation of the transportation service –buses, feeder-buses, employees, companies and services for the main routes. Transmilenio on the other hand is a new physical and functional infrastructure for the organization and operation of collective transportation, which takes into account the re-definition of roles of the diverse actors related to this topic in the city.

The district administration: assumed the responsibility for planning, organizing, controlling, and constructing the necessary infrastructure for the system’s operation. Moreover, it created a district enterprise called “Transmilenio S.A.”58, with a small organizational structure, dedicated to the management and control of contracts with third parties that operate the system.

The private sector, mainly transporters: dedicated to operating buses and other areas of the system, under the leadership of the district administration, which established a system of operation which was put in place by contracting by public bidding59.

From the regulatory perspective, the most important innovation is the change from permit to contract. Instead of permission to operate certain routes, transporters have a demanding service contract to fulfill. The responsibilities and rights, terms of payment and penalties, are now much more clearly specified and articulated in the public transportation contracts, and fiduciary duties and supervised by the public enterprise Transmilenio S.A.60.

Contracting by public bidding is used for: (i) bus operation; (ii) payment collection; (iii) control center; and, (iv) the feeder-bus service. Private sector participation in these activities is intended to guarantee system efficiency and promote competition and cost awareness.

Although Transmilenio undoubtedly offers advantages for the city, the system faces important remaining challenges –not yet solved-, such as the need to end the duality between the traditional collective transportation and Transmilenio,

58

Transmilenio S.A es una “sociedad por acciones de orden distrital con la participación exclusiva de entidades públicas (ella) tendrá personería jurídica, autonomía administrativa, financiera, presupuestal y patrimonio propio. (le) corresponde… la gestión, organización y planeación...” La empresa se conformó mediante el acuerdo 04 de 1999 59

TransMilenio es el cambio de la salvaje guerra del centavo por un esquema de competencia organizada a través de licitaciones públicas… TransMilenio transforma la propiedad dispersa e individual de los buses en propiedad conjunta y las empresas afiladoras en sociedades por acciones. Tomado de Hidalgo Darío. Artículo “Transmilenio mucho más que buses rojos y troncales” publicado en El Tiempo, Bogotá marzo 13 de 2006. 60

Ibid.

24

which currently coexist in the city, and duplicate user costs. In addition, an important amount of resources is required for system maintenance and enlargement and it is not clear if they could be provided by the national or local government. Due to its success many other experiences are in place in other Colombian cities, and national resources have been dispersed. It is also necessary to make the business more democratic, allowing entry of other operators in the new phases of the system and prospective system expansions, small transporters associated in new companies are also needed for a better approval by all transporters61.

Network of bicycle routes articulated to the streets and roads. This network acts as a complement to the public transportation system, with the objective of promoting non-motorized mobilization, which is defined in the Ciclorruta Master Plan62. Presently, the network of bicycle routes consist of 291 Km., organized in a main network, a secondary network, and a complementary one. Rationalization of the use of private automobiles. Aiming to better organize vehicle transit in the streets63, a program called “Pico y Placa”, restricts mobilization at certain times during two days of the week. This restriction keeps approximately 40% of the private vehicles out of circulation every week day64. The restriction has been extended to public transportation vehicles one day a week, according to plate numbers, which rotate from Monday to Saturday. 2.5 Recovery and development of public space Redefining public space as a fundamental element in the conception of a city built to human scale is an important strategy advanced by district administrations since 1995. The strategy was also tied to the goal of generating a positive perception of the city among citizens; it was organized along the following lines: Political management and the redefinition of the public space concept. “In the first Mockus administration, the issue of public space gained a place with respect to a serious speech of what is public…, this was later amplified by Mayor Peñalosa, who converts the public space in one of the elements that produces equality among citizens”65. In the redefinition of the concept and its political handling, these mayors also based their work on studies such as the inventory of the city’s green zones and the Public Space Booklet, which were used in the Territorial Ordainment Plan of

61

Informe de Desarrollo para Bogotá. El futuro de la movilidad en Bogotá. Reflexiones a propósito del Plan de Movilidad. Bogotá 2006. p 18 y 19 62

El Plan Maestro de Ciclorruta es una estrategia orientadsa a promover la movilización cotidiana en bicicleta en la ciudad de Bogotá, con la finalidad de reducir el tráfico y la congestión y lograr positivos dividendos sociales, económicos y ambientales. En www.idu.gov.co. Consultada el 19 de noviembre de 2006 63

“En 1998, cerca del 95% de la malla vial era utilizada por 850.000 vehículos particulares, que solo movilizaban el 19% de los habitantes… El cinco por ciento restante de la infraestructura víal era utilizada por 21.5800 buses de servicio público, que realizaban el 72% de los viajes. En Alcaldía Mayor de Bogotá, “Bogotá para todos”, en la Bogotá del tercer milenio. Historia de una revolución urbana, 2001, p. 122 64

PNUD. Programa de Gestión Urbana, Programa para América Latina y el Caribe. “La transformación de Bogotá, redefinición urbana y espacial” Quito, Ecuador, 2003. p. 33 65

Martín y Ceballos; Bogotá anatomía de una transformación, Políticas de seguridad ciudadana 1995-2003, p. 269

25

2002. In addition, they used one of the main conclusions of the competitiveness study done by the Monitor Company in 1994, which noted the positive relation between quality of public space and city productivity. Administrative restructuring. The functions of existing agencies such as the Institute for Urban Development –IDU-, the Popular Sales Fund, the Public Space Workshop, the District Institute for Recreation and Sports -IDRD-, the José Celestino Mutis Botanical Garden, the District Administrative Planning Department –DAPD-, the Administrative Department for the Environment –DAMA-, and Bogotá’s Water Public Utility –EAAB-, were strengthened and redefined. New entities with specific functions such as the Urban Renovation Enterprise and Mission Bogotá were created. Program and Project design and development, aimed at improving the city’s physical public space infrastructure, by means of:

Enlargement, improvement, and recovery of the city’s parks, strategic ecosystems, and recreational and sport infrastructure. A district park system was created, integrating the neighborhood, local, zone, and district levels. Strategic buildings were bought and reserved to increase the supply of green areas. In addition, models for management, maintenance, and appropriate citizen use, were developed. It is important to highlight the management performed by several respected Colombian institutions like the Cajas de Compensación (mandatory family subsidy organizations that operate on a payroll tax), as well as the activities advanced by the District Park Sustainability Support Network aimed at increasing citizen participation in this area.

Recovery, enlargement, and construction of sidewalks and avenues, aimed at reclaiming public space –which had been mostly invaded by vehicles and street sales- for the pedestrian. This involved activities such as the creation of parking lots, as well as the relocation of street sales, through the Popular Sales Fund.

An urban renovation program66, which adapted certain urban sectors to the prevailing economic and social conditions67. The intervention strategy was classified according to the level of sustainability and economic recovery required by each sector. Examples of urban renovation include the new configuration of public spaces such as San Victorino, Plaza España, Third Millenium Park, and the Jiménez Avenue Environmental Walk.

The recovery of marginal areas, aimed at improving urban conditions and reducing conditions of poverty in zones of the city which were characterized by having grown in subnormal conditions –lack of public utilities, public space, and access routes, among others.

66

Definida desde la ley 9 de 1999 como aquellos planes “dirigidos a introducir modificaciones sustanciales al uso de la tierra y de las construcciones para detener procesos de deterioro fíasico y ambiental de los centros urbanos” 67

PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 2004, p. 149

26

2.6 The revolution in Education Management

The management of Bogotá’s education sector was significantly transformed by the passing of Law 60 of 1993. This legal framework gave government entities –departments, districts, and municipalities-, the autonomous management of resources coming from the current income and the General System of Transfers –SGP-. This legal framework gave Bogotá autonomy in the management of the educational sector. As a certified–authorized- territorial entity, Bogotá received transfers from the Nation, and was able to administer the service of education68. According to Law 715 of 2001, the resources for education were assigned through the General System of Transfers –SGP-, taking into account criteria to ensure equity and complementation, together with the amount assigned per student, as well as the reward for results of territorial education management in terms of coverage and quality. All the municipalities with populations greater than 100,000 inhabitants were certified in the framework of this law. For a territorial entity to be certified in education management, it must meet a minimum of technical, administrative, and financial standards for the management of education. The certification implies autonomy in the management of resources assigned, focusing on citizen needs in accordance to national policy. Certified territorial entities undertake the following functions: (i) management and distribution of SGP resources among educational institutions under their jurisdiction; (ii) direction, guidance, planning, organization, supervision, and evaluation of the educational service according to criteria defined by the Ministry of Education to ensure equity, quality, and efficiency; (iii) distribution of teachers and posts according to the needs; and, (iv) performance evaluation. The combination of legal factors, political will, and administrative efficiency warranted achievement of the main function of Bogotá’s Secretary of Education –SED-: the education of children and youth69. Bogotá’s achievements in matter of education during the past decade are the result of democratic governance oriented at human development70. Efficient management of the education sector is the result of a global strategy for institutional strengthening, consisting mainly of the modernization of the Secretary of Education –SED-, which was achieved by planning, evaluation, and continuous improvement71. A series of strategies were advanced towards improvement of coverage, quality, and efficiency of education, among these: Increase in coverage. Using the criterion of coverage-quality-equity, the enrollment in public schools was increased 37% between 1998 and 2003, which

68

Peña Borrero Margarita. Aprendizajes sobre gestión educativa. La experiencia de Bogotá. 1998-2003. Fundación Empresarios por la Educación. 2005. p. 101 69

Peña Borrero Margarita. Aprendizajes sobre gestión educativa. La experiencia de Bogotá. 1998-2003. Fundación Empresarios por la Educación. 2005. p. 102 70

PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 2004, p. 177 71

PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 2004, p. 165

27

is equivalent to an average yearly rate of 6.5%72. This is the result of several complementary actions, including: (i) the enlargement, reorganization, and use of installed capacity in district educational institutions; (ii) the signing of agreements with private schools with excess capacity, located in zones of high demand and deficit of public supply; and, (iii) the construction of new educational establishments73. In addition, educational supply was reorganized through the merging of educational institutions and the resulting distribution of teachers by locality. To guarantee the permanence of children in schools, certain groups of the population received subsidies which were conditioned by school attendance; this is more a national than a local program. There was also a significant increase in resources for food, transportation, and health insurance74. The introduction of food is a new program that showed much better retention rate at school. There was a discussion as to whether food should be served hot of cold, in order to build a better sense of community among kids.

Public-private collaboration. The Peñalosa administration devised the “schools in concession” program75. In this arrangement, 25 large and well-equipped public institutions are managed by recognized private education institutions of the city, which applied to participate in the program76. Unfortunately, the program did not attain its goal of 50 schools in concession because Mayor Garzón, announced in his campaign that he had a different strategy and fulfilled his promise. Nevertheless, the 25 schools in concession remain in operation. In the medium term, it will be possible to extract lessons learned about the real impact of this strategy. Increase in quality. Since 1998, the district administration designed and implemented a system to evaluate basic competencies in students of third, fifth, seventh, and ninth grade in all the city schools, in the areas of mathematics, language, sciences, and citizen competencies. This system provides guidelines to define policy for improvement of educational institutions, as well as the action plans for each institution and for SED. Since 1997, the strategy for quality improvement has been supported by the creation of the Educational Excellence Prize to acknowledge the institutions that exhibit best practices of school management. The creation of the Network of Libraries –Bibliored- is another example of a best practice, which “offered learning opportunities beyond the spaces and times planned in the curriculum, aiming to enrich the cultural capital of students and

72

Peña Borrero Margarita. Aprendizajes sobre gestión educativa. La experiencia de Bogotá. 1998-2003,p. 28 73

De los más de 240.000 cupos nuevos que se generaron, 505 resultó de la aplicación de parámetros para la asignación de personal docente; 24% de la adecuación y ampliación de edificaciones escolares, 14% de la celebración de convenios con colegios privados y 12% de la construcción de nuevos colegios. 74

Entre 1998 y 2003 Bogotá contó con un presupuesto anual promedio de US$350 millones (90% destinado a gastos recurrentes); 27.855 docentes, 2.345 administrativos; 363 instituciones educativas distritales en 691 sedes y 2.500 centros educativos privados; en el año 2003 había 861 mil estudiantes matriculados (724 mil en instituciones educativas distritales, 114 mil en colegios privados de convenios, 23 mil colegios de concesión); se otorgaban 179 mil refrigerios diarios, y se transportaban 25 mil estudiantes en casi 700 rutas escolares. Estos parámetros se siguen incrementando. En: Ibid. Peña Borrero, Margarita. p. 15. 75

PNUD, Bogotá una Experiencia Innovadora de Gobernabilidad, marzo 2004, p. 167-169 76

Peña Borrero Margarita. Aprendizajes sobre gestión educativa. La experiencia de Bogotá. 1998-2003.p. 57

28

their families, as well as the community as a whole”77. Bibliored articulates the actions developed by four public mega-libraries78 of the city, together with more than fifty community libraries. Moreover, REDP was created, supplying 28,000 computers to 336 public educational institutions, connection to the Internet, and 27,000 e-mail accounts for teachers. Efficiency. The efficient management of resources is the result of the modernization of the Secretariat of Education, together with re-engineering processes that involved the redefinition of procedures, the creation of a new organizational structure, and the establishment of coordination and follow-up mechanisms. An important component of this process was the establishment of an information system to support administrative processes and sector planning. Processes to professionalize human talent were also undertaken, defining selection, promotion, and evaluation criteria, based on performance.

77

Peña Borrero Margarita. Aprendizajes sobre gestión educativa. La experiencia de Bogotá. 1998-2003.p. 29 78

Biblioteca Luis Angel Arango, Biblioteca Virgilio Barco, Biblioteca El Tintal y Biblioteca El Tunal

29

CHAPTER 3

STRUCTURE AND ECONOMIC PERFORMANCE OF BOGOTÁ

3.1 Economic and industrial profile The population of Bogotá is 6.7 million persons -16% of the Colombian population- according to the 2005 census. Bogotá contributes US$ 23,297 million79 to Colombia’s GDP -nearly 22% of the national GDP-, an amount equivalent to 7% of the Andean Community’s GDP. The city’s PIB per capita is US$ 3,438, which is higher than the national average (US$ 2.581 per person)80. In terms of its economic structure, the Colombian capital has an economic vocation focused on the service industry. This is the most important and most dynamic sector: in 2002, it contributed 77% of the city’s GDP in traditional activities such as real estate, financial services, business, community and social services, public administration, and retail, as well as other more advanced services such as telecommunications and software. Industry is the second sector in participation in the city’s GDP -17%-. It includes production of food, drink, and tobacco; chemical products, textiles and apparel; leather goods; and, light metal industry (metalmecánica)81. There are 219,100 firms in the city, 87% of which are micro-enterprises, 12% are Small and Medium Enterprises –PYMES-, and the remaining 1% are large enterprises. In 2005, 39% of the city’s firms were classified as belonging to the commercial sector, and 14% to industry. In general, firms have a moderate vocation for exports, since only 12% carry out international trade activities82. As it will be shown later, the Bogotá-Cundinamarca region does not stand out for its exports at the national level (only 12% of the national exports). On the other hand, the region has a large incidence in the total of Colombian imports, amounting to almost 60% the nation’s total. Bogotá is an important center of employment generation. In 2005, the city generated jobs for 3,217,165 persons, 49% of who worked in service-related activities excluding retail, 26% in the commercial sector, 19% in industry, and 5% in construction. Nevertheless, Bogotá is also the city with the highest number of unemployed persons in the country (471,000 in 2005), and has one of the highest unemployment rates in Latin America (12.8%), although unemployment has been falling in a sustained manner83. To sum up, Bogotá is the most relevant city of Colombia, in social and economic terms, since it concentrates the highest percentage of the population and for the value of GDP created at the national level.

79

In 1994 constant US dollars for 2003. 80

Balance de la Economía Bogotana en el 2005 y en el primer semestre de 2006: 2003 – 2004. Cámara de Comercio de Bogotá. 2006. 81

Ibid. 82

Ibid. 83

Ibid.

30

Figure 9: Bogotá’s GDP composition by sectors in 2003

GDP by Sector in Bogotá, 2003

Financial and

business services,

and real estate

32%

Industry

16%

Electricity, Water,

and Gas

3%

Construction

5%

Commerce, Repair,

Restaurants, and

Hotels

13%

Social, personal,

and community

services

17%

Agriculture, forestry,

game, and fishing

5%Transport, Storage,

and communication

9%

Source: DANE. Cuentas económicas departamentales 2003. Calculations: Dirección de Estudios e Investigaciones. Cámara de Comercio de Bogotá.

3.2 Evolution of Industry Structure According to Table 1, service related sectors and sectors related to the intermediation of goods increased their participation as generators of GDP during the period 1990-2003, particularly telecommunications, tourism (hotels and restaurants), health services, retail, financial intermediation, and education, among others. In contrast, traditionally important clusters such as industry and construction have lost participation in the city GDP generation, with a decrease of 5.5% and 3.5% respectively. The city’s economic structure has evolved according to the global trends, reducing value generation in traditional industries, and focusing more on economic activities based on services. The above indicates that precisely the service sector -in its more ample definition- plays a role of enormous importance in the present and future productivity of Bogotá. This sector is certainly much more relevant than is usually acknowledged in the public and academic discussions in the city. Consequently, it is necessary to study the conditions required to generate greater competitiveness in this sector. Its vulnerability within the framework of a Free Trade Agreement with the USA should be carefully characterized. It is equally relevant to understand how to offer better academic education, as well as the work competencies required in the service area, and to corroborate the relevance and adequacy of the system of training and vocational work available in the city in this area. In the short term, it is necessary to understand the basis for sustainability of this industry.

31

Table 1: GDP by sectors in Bogotá 1990-2003.

CLUSTER PARTICIPATION

GDP 1990 PARTICIPATION

GDP 2003 VARIATION

Agriculture, forestry, game, and fishing 0,1% 0,0% 0,0%

Mining 0,2% 0,5% 0,3%

Electricity, gas, and water 3,6% 3,3% -0,3%

Industry 22,2% 16,6% -5,5%

Construction 9,0% 5,5% -3,5%

Commerce 8,5% 10,2% 1,8%

Automobile repair services 1,5% 1,4% -0,1%

Hotels and restaurants 1,6% 2,1% 0,4%

Transportation 5,7% 5,4% -0,3%

Mail and communications 3,1% 4,4% 1,2%

Financial intermediation 8,2% 11,4% 3,2%

Real estate 16,6% 16,3% -0,3%

Business services, except financial services and real estate 2,9% 4,7% 1,8%

Domestic 0,5% 0,4% -0,1%

Marketing schools 2,0% 2,1% 0,0%

Social and health 2,4% 2,1% -0,3%

Associations, leisure, and others 2,5% 2,2% -0,3%

Public administration and other community services 4,5% 7,9% 3,4%

Teaching, except marketing 1,0% 1,6% 0,6%

Social and health, not related to marketing 0,9% 1,6% 0,8%

Associations and leisure, not related to marketing 0,3% 0,2% -0,1%

Source: DANE. Cuentas regionales departamentales; Calculations by the authors

3.3 Economic growth with respect to the country Bogotá’s economic performance is directly related to the country’s economic cycle, but it exhibits a greater volatility than may be observed in the country as a whole. This means that during periods of growth and economic boom, the capital city has developed at a faster pace than the rest of the country; while in economic depressions, crisis are felt more intensely in the capital city, as dramatically observed in 1999 (see Figure 10). The average annual growth of Bogotá between 1990 and 200584 was higher than that of the country and its more relevant regions. The city’s total growth was slightly lower than the country’s growth for that same period (2.78% vs. 2.98%). Nevertheless, during the 2000-2005 periods, Bogotá had a greater average growth than Colombia (3.66% vs. 3.43%). It is precisely during this period of time that the city experienced more important progress in terms of transportation and security improvement (see Table 2).

84

Data source for 2004 and 2005 is the web page of the Chamber of Commerce of Bogotá at http://camara.ccb.org.co/documentos/2006_12_15_12_1_35_Tablero%20de%20Indicadores%20IV%202006.mht

32

Figure 10: GDP Growth in Bogotá and Colombia 1990-2005 Crecimiento PIB Bogota vs. Colombia

-15,00%

-10,00%

-5,00%

0,00%

5,00%

10,00%

15,00%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Bogota Colombia

Source: DANE. Cuentas Nacionales departamentales 1999 – 2003 and Cámara de Comercio de Bogotá

85; Calculations and graph by the authors

Table 2: GDP Growth in Bogotá and Colombia 1990-2005.

PIB en millones

de pesos de 1994 crecimiento

PIB en millones

de pesos de 1994 crecimiento

1990 12.957.160 56.873.930

1991 13.334.351 2,91% 58.222.935 2,37%

1992 13.876.251 4,06% 60.757.528 4,35%

1993 14.884.447 7,27% 64.226.882 5,71%

1994 16.374.307 10,01% 67.532.862 5,15%

1995 16.807.311 2,64% 71.046.217 5,20%

1996 16.577.703 -1,37% 72.506.824 2,06%

1997 17.120.271 3,27% 74.994.021 3,43%

1998 17.411.812 1,70% 75.421.325 0,57%

1999 15.524.871 -10,84% 72.250.601 -4,20%

2000 16.097.923 3,69% 74.363.831 2,92%

2001 16.311.310 1,33% 75.458.108 1,47%

2002 17.007.295 4,27% 76.917.222 1,93%

2003 17.566.924 3,29% 79.884.490 3,86%

2004 18.304.735 4,20% 83.699.782 4,78%

2005 19.256.581 5,20% 87.989.681 5,13%Tasa de

crecimiento

1990-2005

Tasa de

crecimiento

2000-20053,66% 3,43%

AÑO

BOGOTÁ COLOMBIA

2,78% 2,98%

Source: DANE. Cuentas Nacionales departamentales 1999 – 2003 y Cámara de Comercio de Bogotá

86; Calculations and graph by the authors

3.4 Economic performance of Bogotá and its more dynamic economic

sectors 3.4.1 Productivity Bogotá’s productivity -measured as GDP per capita- grew a modest 8% from 1990 to 2005, in contrast to the more rapid growth of 13.6% from 2000 to 2005, which indicates some acceleration in the past five years (see Table 3 and

85

Data source for 2004 and 2005 is the web page of the Chamber of Commerce of Bogotá at http://camara.ccb.org.co/documentos/2006_12_15_12_1_35_Tablero%20de%20Indicadores%20IV%202006.mht 86

Data source for 2004 and 2005 is the web page of the Chamber of Commerce of Bogotá at http://camara.ccb.org.co/documentos/2006_12_15_12_1_35_Tablero%20de%20Indicadores%20IV%202006.mht

33

Figure 11). This strong growth could be explained in part by progress in the factors that drive competitiveness87, and especially by improvement of the Colombian economy –which, as shown earlier, is felt more strongly in the city’s performance. As shown in Table 3, it is also noteworthy that the city’s level of productivity is between 20% and 27% higher than that of the other dynamic regions like Antioquia and Valle del Cauca.

Table 3: GDP per capita Bogotá, Antioquia, and Valle in constant US$ of 1994

GDP per Capita in Constant US Dollars of 1994

YEAR BOGOTA ANTIOQUIA VALLE

1990 3.183 2.466 2.337

1991 3.187 2.364 2.377

1992 3.226 2.414 2.434

1993 3.362 2.478 2.545

1994 3.590 2.503 2.553

1995 3.581 2.603 2.738

1996 3.449 2.578 2.738

1997 3.477 2.656 2.701

1998 3.446 2.535 2.675

1999 2.993 2.436 2.535

2000 3.025 2.538 2.519

2001 3.002 2.487 2.550

2002 3.065 2.573 2.501

2003 3.095 2.659 2.499

2004 3.231 2.747 2.556

2005 provisional 3.335 2.803 2.622 Source: DANE. Cuentas Nacionales departamentales 1999 – 2005 Calculations and table by the authors

Figure 11: GDP per capita in constant US$ of 1994 PIB PER CAPITA BOGOTA

2.600

2.700

2.800

2.900

3.000

3.100

3.200

3.300

3.400

3.500

3.600

3.700

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2.0

00

2001

2.0

02

2.0

03

2.0

04

2.0

05

Do

lare

s C

tes.

de 1

994

2.200.000

2.300.000

2.400.000

2.500.000

2.600.000

2.700.000

2.800.000

2.900.000

3.000.000

3.100.000

Peso

s C

tes.

de 1

994

Source: DANE. Cuentas Nacionales departamentales 1999 – 2003 y Cámara de Comercio de Bogotá

88; Calculations and graph by the authors

87

These are dealt with in the section “Drivers of economic performance”. 88

Data source for 2004 and 2005 is the web page of the Chamber of Commerce of Bogotá at http://camara.ccb.org.co/documentos/2006_12_15_12_1_35_Tablero%20de%20Indicadores%20IV%202006.mht

34

It should be noted that the fall in the productivity of Bogotá during the second half of the decade of the nineties, observed in Figure 11, may be explained by the country’s economic crisis during that period. It may also obey to statistic factors such as deviations in the 1993 population census, which is the basis used for the GDP per capita calculations. In spite of the growth in levels of per capita GDP during the past five years, the productivity of the occupied work force in Bogotá continues to be below that of other leading cities in the region. In 2005, Santiago de Chile had the highest productivity in the region, with a GDP of US$ 17,857 per occupied person (see Figure 12).

Figure 12: GDP per occupied person, 1999 and 2005.

Source: América Economía Intelligence, Mejores Ciudades para Hacer Negocios en América Latina, 2005, and National Institutes of Statistics of each country. Calculations and graph: Dirección de Estudios e Investigaciones, Cámara de Comercio de Bogotá.

3.4.2 Employment generation During the past decade, job creation has progressed in a sustained manner; the number of occupied persons grew from 2,499,846 in 1996 to 3,191,493 in 2005. This is equivalent to a 27.7% increase in occupation, or the creation of 691,647 new jobs (Figure 13). In addition, since the year 2000, Bogotá has succeeded in consistently lowering the rate of unemployment -which reached 13.1% in 2005-, a level which is still higher than the 10.3% registered in 1996 (see Figure 14).

35

Figure 13: Employed population 1996-2005 Población ocupada

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Figure 14: Unemployment rate 1996-2005 Tasa de desempleo

0,0

5,0

10,0

15,0

20,0

25,0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

%

Source: DANE. Encuestas nacional y continua de hogares. Graph by the authors

In spite of progress in job generation during the past years, Bogotá continued to exhibit the highest unemployment rate of the region in 2005 (Figure 15).

Figure 15: Unemployment Rates in Latin America, 2005.

Source: National Institutes of Statistics of each country and Internacional Labor Organization, ILO; Calculations and graph: Dirección de Estudios e Investigaciones, Cámara de Comercio de Bogotá.

3.4.3 Creation of new firms The net creation of firms in Bogotá has increased almost constantly since the year 2000. The number of firms created grew from 11,550 in 2000 to 14,418 in 2005, and the number of liquidated firms grew from 2,831 to 3,093, so that the net creation of firms during this period was 29.9% -passing from 8,719 in the year 2000 to 11,325 firms per year in 2005- (see Figure 16). Thus, the city has experienced a very clearly favorable economic behavior during the past five years.

36

Figure 16: Number of companies created and liquidated yearly, and net annual addition of firms in Bogotá 2000-2005

11550

13 155 12 8 3 2

14 0 6 0

152 3 814 4 18

2 8 3 1 2 70 8 2 9 53 2 8 3 1 2 6 6 93 0 9 3

8 719

10 4 4 79 8 79

112 2 9

12 56 9

113 2 5

0

2000

4000

6000

8000

10000

12000

14000

16000

2000 2001 2002 2003 2004 2005

Companies created Companies liquidated Net annual addition of f irms

Source: CCB (2004 - 2005). Registro Mercantil, Cámara de Comercio de Bogotá. Calculations and graph: Dirección de Estudios e Investigaciones, CCB.

As shown above, Bogotá does not rank well among Latin American cities in terms of productivity and employment levels. The city is in the lower half of productivity levels per occupied person in the region, and exhibits the highest unemployment rate in Latin America. Nevertheless, there has been progress in these two areas and in the promotion of entrepreneurial activity –measured by firm creation-, especially in the past five years. The evolution of some of the most important factors for metropolitan competitiveness is analyzed below.

3.4.4 Trade

In economic terms, Bogotá is more important for its imports than for its exports, indicating that Bogotá has more of a logistics and service role for the whole Colombian economy than anything else. Since the year 1999, the region’s total share of exports has grown importantly, but the city has a net deficit in its relation with the world. This indicates that a challenge for the city is to find more favorable terms of relationship with the rest of the world (Figures 17 and 18).

Figure 17: Total Share of Bogotá-Cundinamarca region in the commercial flows of Colombia (imports and exports) during the period 1991-2003

0

10

20

30

40

50

60

70

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Reg

ion

's s

har

e (%

)

Region's export share Region's imports share

Source: “TRATADO DE LIBRE COMERCIO COLOMBIA - ESTADOS UNIDOS: ANALISIS DEL IMPACTO ECONOMICO SOBRE LA

REGION BOGOTA – CUNDINAMARCA”, Research document prepared by FEDESARROLLO for the Bogotá Chamber of Commerce, M. Cárdenas, JC Chaparro, C. Gamboa, M Meléndez, M Reina, and JG Zapata, Bogotá- December 2004.

37

Figure 18. Total Exports of Bogotá-Cundinamarca region during 1991-2003

Source: “TRATADO DE LIBRE COMERCIO COLOMBIA - ESTADOS UNIDOS: ANALISIS DEL IMPACTO ECONOMICO SOBRE LA

REGION BOGOTA – CUNDINAMARCA”, Research document prepared by FEDESARROLLO for the Bogotá Chamber of Commerce, M. Cárdenas, JC Chaparro, C. Gamboa, M Meléndez, M Reina, and JG Zapata, Bogotá- December 2004.

When different export clusters are measured in size in the case of Bogotá-Cundinamarca Region, it is clear that fresh cut flowers (agriculture) are the prominent cluster of this region, way ahead of other options. Printing and pharmaceutics, motor vehicles, plastics, and textiles and garments, and glass products are also important. It is important to note that other clusters like health and financial services, higher education, communications, logistics, construction, retail, and other services like and engineering, etc., which are very important in the case of Bogotá, apparently only serve the domestic market and are not relevant in terms of exports. Figure 19: Bogotá-Cundinamarca: Main 15 export products, sectors using CIIU (4 digits), average 1991-2003

0 5 10 15 20 25 30 35

Agricultural products

Printing, publishing, and related industries

Pharmaceutical and medicines

Vehicles

Plastic products

Tricots (Apparel)

Leather goods, except footwear

Glass and glass products

Textiles

Soaps and other toiletries

Construct. machine, indust. electric mach

Chemical products

Metal products, exc. machinery and equip.

Apparel, except footwear

Construct, machinery equip., exc. elect.machinery

Pro

du

ct

Product share in exports (%)

Source: “TRATADO DE LIBRE COMERCIO COLOMBIA - ESTADOS UNIDOS: ANALISIS DEL IMPACTO ECONOMICO SOBRE LA REGION BOGOTA – CUNDINAMARCA”, Research document prepared by FEDESARROLLO for the Bogotá Chamber of Commerce, M. Cárdenas, JC Chaparro, C. Gamboa, M Meléndez, M Reina, and JG Zapata, Bogotá- December 2004.

38

Exports from less populated Colombian regions, like the Pacific region and the Department of Antioquia are growing more rapidly than the exports from Bogotá. This suggests that these regions are finding interesting opportunities as well. Apparently Bogotá’s most important role is clearly for the national market.

Bogotá is also highly dependent on imports –according to Figure 20-, since other regions of Colombia do not present the same growth of imports during the period 1991-2003.

Figure 20. Imports growth during the period 1991-2003

5,9%

7,6%

7,7%

8,5%

8,9%

10,5%

17,1%

0% 5% 10% 15% 20%

Caribe

Valle del Cauca

Eje Cafetero

Antioquia

Promedio Nacional

Bogotá-Cundinamarca

Otros depart.

Crecimiento anual promedio 1991-2003

Source: “TRATADO DE LIBRE COMERCIO COLOMBIA - ESTADOS UNIDOS: ANALISIS DEL IMPACTO ECONOMICO SOBRE LA

REGION BOGOTA – CUNDINAMARCA”, Research document prepared by FEDESARROLLO for the Bogotá Chamber of Commerce, M. Cárdenas, JC Chaparro, C. Gamboa, M Meléndez, M Reina, and JG Zapata, Bogotá- December 2004.

Figure 21. Bogotá-Cundinamarca: Main 15 import products, sectors using CIIU (4 digits), average 1991-2003, Rev 2

1,9

2,3

2,5

2,6

2,9

2,9

3,1

3,3

4,2

4,7

5,4

5,6

5,8

9,9

12,7

0 2 4 6 8 10 12 14

Construc maq.nep, excep.la de trabajar

Construc maq.y equipo n.e.p.excep. maq.eléc.

Equipos profesionales y cientif.

Prod.químicos n.e.p.

Construc.maq., aparatos y equipos no clasif icados antes

Refinerías de petróleo

Resinas sintéticas, mat.plásticas y f ibras artif .

Ind. básicas de hierro y acero

Prod. farmacéuticos y medic.

Prod. Agropecuaria

Maq.oficina, cálculo y contabilidad

Aeronaves

Sust. Quimicas básicas, excep.abonos

Equipos y aparatos de radio, televisión y telecom

Vehículos automotores

Product share in total imports (%)

Source: “TRATADO DE LIBRE COMERCIO COLOMBIA - ESTADOS UNIDOS: ANALISIS DEL IMPACTO ECONOMICO SOBRE LA

REGION BOGOTA – CUNDINAMARCA”, Research document prepared by FEDESARROLLO for the Bogotá Chamber of Commerce, M. Cárdenas, JC Chaparro, C. Gamboa, M Meléndez, M Reina, and JG Zapata, Bogotá- December 2004.

When the main import products of Bogotá are identified, vehicles, appliances, communications devices, planes, computers, chemical products, petrochemicals are very important products for the city.

39

Figure 22. Main destinations of Bogotá-Cundinamarca region exports, average periods considered 1994-1998 and 1999-2003

Comunidad Andina;

35,7%

M ercosur; 3,3%Chile; 2,5%

M CCA; 3,2%

Resto; 2,7%

M éxico; 2,5%

UE 25; 8,3%

Demás ALCA; 6,3%

Estados Unidos;

35,4%

Source: “TRATADO DE LIBRE COMERCIO COLOMBIA - ESTADOS UNIDOS: ANALISIS DEL IMPACTO

ECONOMICO SOBRE LA REGION BOGOTA – CUNDINAMARCA”, Research document prepared by FEDESARROLLO for the Bogotá Chamber of Commerce, M. Cárdenas, JC Chaparro, C. Gamboa, M Meléndez, M Reina, and JG Zapata, Bogotá- December 2004.

3.4.5 Most Dynamic Productive sectors The section “Evolution of industry structure” showed that the economic importance of the service industry is reflected by the greater dynamism of its component sectors (See Table 1). As may be observed in Table 4, telecommunications, tourism (hotels and restaurants), health, commerce, financial intermediation, education, and public administration exhibit a higher growth than the city average (36%). Thus, these sectors have, to a great extent, supported the city’s economic dynamism.

Table 4: GDP Growth by service sector 1990-2003 (millions of constant 1994 pesos)

Economic sector 1990 2003 Variation

Commerce 1.095.794 1.796.603 64%

Telecommunications and mail services 405.220 767.255 89%

Financial intermediation 1.068.679 2.008.146 88%

Education 132.949 279.720 110%

Health 112.548 285.953 154%

Hotels and restaurants 211.005 363.645 72%

Public administration 584.988 1.382.973 136%

GDP of Bogotá 12.957.160 17.566.924 36% Source: DANE. Cuentas regionales departamentales; Calculations by the authors

The service industry is important for Bogotá due to its great dynamism, and also because of the high concentration of service demand and supply in the region. The capital city concentrates 38% of the supply of communications services in

40

Colombia, followed by Antioquia, with 14%. Almost half of the supply of financial services (46%) is located in Bogotá. In addition, between 1990 and 2001, the Bogotá-Cundinamarca region delivered 30% of the public administration services, followed by the Department of Antioquia which delivered 13%. According to the National Home Survey 1990-2000, important activities such as commerce, financial intermediation, and communications and transportation exhibited employment creation growth rates of 47%, 23%, and 25.5%, respectively, which were above the city’s growth rates (21%)89. An indication of potential spill-overs and cluster economies may be observed for most of the sectors analyzed. The higher education, health, banking, and tourism sectors are concentrated in four contiguous localities –Chapinero, Usaquén, Suba, and Engativá-, where between 40% and 50% of the firms are dedicated to activities in these industries. The concentration of firms dedicated to higher education is particularly evident in the locality of Chapinero. On the other hand, the retail and telecommunications sectors are very relevant in generation of GDP and employment; there is no evidence of a considerable concentration of these activities (see Figures 23 to 28). Economic development based on a robust service supply is of particular importance in the case of Bogotá: an inland city, surrounded by mountainous geography, and connected to the rest of the country by a limited road infrastructure. The consolidation of service-related clusters will allow a better and more efficient flow of information, as well as access to more qualified human resources and lower operating costs via economies of agglomeration. Figure 23: Concentration of firms dedicated to higher education by locality

(53.5% in four localities)

Figure 24: Concentration of healthcare firms by locality

(45.7% of firms in four localities)

Source: “Caracterización de las cadenas productivas de manufactura y servicios en Bogotá y Cundinamarca 2005” and “El sector servicios en la región Bogotá-Cundinamarca 2004”, Bogotá Chamber of Commerce. Graph by the authors.

89

Own calculations.

41

Figure 25: Concentration of financial intermediation firms by locality

(82% of firms in four localities)

Figure 26: Concentration of firms dedicated to tourism by locality

(41.9% of firms in four localities)

Figure 27: Concentration of telecommunications, transportation, and storage firms by locality

(48.2% of firms in four localities)

Figure 28: Concentration of firms dedicated to commerce by locality

(only 10.1% of firms in two localities)

Source: “Caracterización de las cadenas productivas de manufactura y servicios en Bogotá y Cundinamarca 2005” and “El sector servicios en la región Bogotá-Cundinamarca 2004”, Bogotá Chamber of Commerce. Graph by the authors.

3.5 Bogotá and its economic structure - conclusions Bogotá is the most relevant city of Colombia in economic terms, since it makes the largest contribution to the National GDP, and generates the most employment. In addition, since the year 2000, the city has exhibited the greatest growth dynamics compared to other regions. Although the city’s industrial structure has not changed radically in the past 15 years, the consolidation of Bogotá as a service economy is evident: service industries account for approximately three fourths of wealth creation and, in contrast with the industrial sector, services have increased their participation in the city’s GDP. The behavior of the economy of Bogotá is highly volatile with respect to the national economy. In periods of expansion, the city’s growth is higher than that of the country, while crisis are felt harder in the capital city than in the rest of the nation. There is no conclusive explanation of the reason for this phenomenon, but it is clear that this volatility notably affected Bogotá’s economy during the national crisis of 1999, when the city’s growth plummeted; there was an

42

important reduction in productivity –measured in per capita GDP-, and an obvious increase in unemployment rates. Although the effects of the crisis are still visible, the recovery of the city’s economy since the year 2000 is evident, as demonstrated by the acceleration of productivity, the continuous decline of unemployment rates, and a consistent creation of new firms.

43

CHAPTER 4

POSSIBLE DRIVERS OF ECONOMIC PERFORMANCE AND

COMPETITIVENESS This section presents the evolution of key variables which are important for city competitiveness, such as mobility –transportation-, public security, and access to housing. Another high impact variable, public finance management is also analyzed. Public finance management is of special importance in the case of Bogotá. 4.1 Mobility - Transportation During the past twenty years, the city administration has had two key initiatives to promote the development of public transportation. Towards the end of the decade of the eighties, public and private vehicles were assigned separate lanes in the busy Caracas Avenue of Bogotá; the project was initially called “Troncal de la Caracas”. Before the bus-only lane was defined, approximately 16,000 passengers used the roadway, at an average speed of 5 km/hour –the speed of a fast walker-; after the inauguration of the “Troncal de la Caracas”, average speed rose to 20 km/hour90. As one transport expert noted: “this increase was impressive, and it was attained with a minimal investment” 91

.

Figure 29: Transmilenio scope Cobertura troncales Transmilenio

8,23

16,8719,48

25,06

33,28

39,99

0

5

10

15

20

25

30

35

40

45

2000 2001 2002 2003 2004 2005

Km

/Carr

il

Source: Instituto de Desarrollo Urbano Graph: Bogotá Cómo Vamos.

Building on this preliminary initiative, towards the end of the decade of the nineties, the Transmilenio Public Transportation System –STM-- and the Bike-Route Network were inaugurated. Since then, these initiatives have grown 386% and 61% in km. of routes, respectively (see Figures 29 and 30), and have contributed to a reduction in the time of travel from 58 to 52.7 minutes between the years 2000 and 2005 (Table 5) in spite of the deficient state

of the city’s roadways, and the increase of ownership of private cars. Specifically, today, the Transmilenio Express Lane of the Caracas Avenue mobilizes up to 40,000 passengers during peak times at speeds ranging from 26 to 28 km/hour92.

90

Interview with Jorge Acevedo, Ph.D., expert in transportation 91

Ibid. 92

Ibid.

44

Table 5: Times of travel in Bogotá in minutes 2000-2005 Average time per trip in Bogotá (minutes)

2000 2001 2002 2003 2004 2005

Total time spent of a non motorized trip

14 14,4 15,7 15 15 16,09

Total time spent of a motorized trip 44 35 35,3 32,8 37,6 36,64

Total time spent on a trip 58 49 50,9 47,8 52,6 52,74 Source: Percepción de tiempos de desplazamiento en Bogotá D.D., Secretaría de Transito y Transporte. Cálculos y gráfico: Dirección de Estudios e Investigaciones, CCB

Eighty percent of the passengers in Bogotá travel in public transportation93. Increases in the speed of travel and in the volume of mobilized passengers, in addition to the reduction of travel time by 32%, which have been made possible by innovations like Transmilenio94, have resulted in a more efficient use and higher productivity of human resources in the city.

Figure 30: Coverage of bike-route network

Cobertura ciclorutas

19.642

25.920 26.91830.028 30.354

31.681

0

5000

10000

15000

20000

25000

30000

35000

2000 2001 2002 2003 2004 2005

Km

s.

Source: Institute for Urban Development, IDU Graph: Bogotá Cómo Vamos.

Since private vehicles account for 42% of the city´s traffic congestion, while mobilizing only 19.6% of all passengers95, the focus on public transportation represents great efficiencies in mobility. On the other hand, the road network is in a critical state; in 2005, only 28% of the streets and roads were in good state (see Figure 31).

Figure 31: Road network conditions in Bogotá 2005

Good

28%

Average

19%

Deficient

53%

The new transportation systems which have been implemented may translate into a greater mobilization of human resources with less impact on the roads96, and thus, less expenditure for maintenance and renovation of the roads in the future. In addition, the choice of a system centered on buses means that Bogotá has a system that costs 8 or 9 times less than a subway system with equivalent transportation capacity97.

The enlargement of the public transportation system has improved the dynamism of the health care sector. Due to bad planning of the location of health care facilities, clinics and health centers that should be situated near workplaces –where people spend most of their time-, are located in residential zones. Thanks to Transmilenio, there is now greater affluence to the clinics located on a major highway, Autopista Norte. As a result, there is easier access

93

PNUD. El Futuro de la Movilidad en Bogotá- Reflexiones a propósito del Plan Maestro de Movilidad y Estacionamientos. Cuadernos del Informe de Desarrollo Humano para Bogotá, No.1. Bogotá, Junio 2006. 94

Ibid 95

Ibid 96

A pie y en bicicleta. 97

Interview with Jorge Acevedo

45

to health care facilities, which in turn promotes better economic dynamics and higher productivity. This is especially important considering that elevated user flow is required to make the acquisition of very high cost medical equipment economically feasible98. Indicators related to city transportation show mixed results. Although the Transmilenio System –STM- and the Bike-route network have aggressively increased coverage, these systems are still limited. They coexist with the traditional collective system of public transportation –STPC-99, which is disconnected from Transmilenio, and they are not truly integrated into a unique transportation system. Transmilenio buses and STPC vehicles circulate on the same roads. In addition, users must pay two rates –one in STM and one in STPC- to reach one destination. As a result, the percentage of family income destined to transportation has increased from 7.7% in the decade of the eighties to 14.22% at present100. Paradoxically, this could hamper the city’s desire of favoring the access of majorities to public transportation. Moreover, according to Figure 32, the street network of Bogotá is in a very deficient state, especially in streets that are not arteries. Artery routes in good state amount to 56% of the total, which is much better than the situation of the intermediate and local street network. A critical problem in Bogotá is the recovery of the road network, which is at the limit of its capacity for vehicle mobilization. The cost of recovery and fixing of the streets and roads could amount to 8 billion pesos101. The city does not have this amount of money and, the sum could rise due to great pressure imposed on city streets by the significant growth of the amount of vehicles102.

Figure 32: State of the Network of roads by component in Bogotá 2005

56%

10%

28%26%33%

9%

18%

57%63%

0%

10%

20%

30%

40%

50%

60%

70%

Arteries Intermediate roads Local roads

Component of the road network

Good Average Deficient

Source: Base de Datos del Inventario y Diagnóstico de la Malla Vial - IDU - Diciembre de 2005 Gráfico: Los autores.

98

Cendex 99

STPC: Sistema de Transporte Público Colectivo 100

Op. Cit. PNUD. El Futuro de la Movilidad en Bogotá. 101

Interview with Jorge Acevedo 102

Op. Cit. PNUD. El Futuro de la Movilidad en Bogotá.

46

Bogotá needs a more efficient highway system to reach the northern coast of Colombia. It is also necessary to accelerate the conclusion of a highway to reach the Magdalena river basin103. According to the Economist Intelligence Unit, Bogotá has a transportation cost index of 102, which makes it one of the most expensive Latin American cities in terms of mobilization costs. In other words, the city exhibits relevant progress, but large gaps remain in terms of competitiveness in transportation (see Figure 33).

Figure 33: Cost of transportation in Latin American cities Costo de transporte en ciudades de América Latina

7484 89

97 102 102 103116

0

20

40

60

80

100

120

140

Car

acas

Bue

nos Aire

s

C. d

e M

éxico

Lim

a

sant

iago

Bog

otá

Sao

Pau

lo

Quito

Índ

ice

Fuente: The Economist Intelligence Unit Limited, Worldwide Cost of Living Survey. Cálculos y gráfico: Dirección de Estudios e Investigaciones, CCB.

Although the city’s airport is first in cargo transportation in Latin America and fourth in passenger mobilization in the region, it is not competitive because of congestion and high costs104. This contributes to increasing the cost of transporting goods and services, dissuades possible investors from coming to the region. The cost of transportation in Bogotá is among the highest in Latin America (Figure 14). In addition, Bogotá’s airport El Dorado was the most expensive airport in the region in 2003; average fees for international travelers amount to US$ 45, and US$ 763 for airplanes (Figures 34 and 35). The private sector, the city mayor, and the national government are now finally dedicating time and attention to the modernization of the airport terminal -passengers and cargo-, aiming to improve its operation. A new concession with that aim is in place since 2006.

103

The highway connecting Bogotá with the Magdalena River basin was granted in concession to the firm COMSSA, but the construction was interrupted for several years due to a legal controversy. 104

Julio Cesar Corredor. Asesor de promoción de inversión. Bogotá Región Dinámica. Entrevista personal 21 de noviembre de 2006.

47

Figure 34: Rates charged to international passengers, 2003 Main Latin American cities

Fuente: IATA, IATA Taxi Force, America Economía Intelligence; Cálculos y gráfico: Dirección de Estudios e Investigaciones, CCB.

Figure 35: Airport costs in Latin America, 2003

Fuente: IATA, IATA Taxi Force, America Economía Intelligence. Cálculos y gráfico: Dirección de Estudios e Investigaciones, CCB.

Table 6: Transportation and GDP in Bogotá, 2000-2005

AÑO

PIB Bogota

(Millones de pesos

de 1994)

Cobertura troncales

Transmilenio

(Km/carril)

Cobertura ciclorutas

(porcentaje meta POT)

2000 16.097.923 8,23 60,25

2001 16.311.310 16,87 79,51

2002 17.007.295 19,48 82,57

2003 17.566.924 25,06 92,11

2004 18.304.735 33,28 93,11

2005 19.256.581 39,99 97,18

0,98 0,86Correlación Fuentes: Instituto de Desarrollo Urbano, Bogotá Cómo Vamos, DANE- Cuentas Nacionales departamentales 1999 – 2003 y Cámara de Comercio de Bogotá Cálculos: Los autores.

48

Table 7: Km of Transmilenio routes and GDP of Bogota

AÑO

PIB per capita

Bogota (Dolares de

1994)

Cobertura troncales

Transmilenio

(Km/carril)

Cobertura ciclorutas

(porcentaje meta POT)

2000 3.025 8,23 60,25

2001 3.002 16,87 79,51

2002 3.065 19,48 82,57

2003 3.095 25,06 92,11

2004 3.150 33,28 93,11

2005 3.438 39,99 97,18

0,86 0,66Correlación Fuentes: Instituto de Desarrollo Urbano, Bogotá Cómo Vamos, DANE- Cuentas Nacionales departamentales 1999 – 2003 y Cámara de Comercio de Bogotá Cálculos: Los autores.

Table 8: Transportation and occupied population in Bogotá 2000-2005

AÑO Población ocupada

Cobertura troncales

Transmilenio

(Km/carril)

Cobertura ciclorutas

(porcentaje meta POT)

2000 2.653.789 8,23 60,25

2001 2.691.848 16,87 79,51

2002 2.799.034 19,48 82,57

2003 2.964.912 25,06 92,11

2004 3.023.573 33,28 93,11

2005 3.191.493 39,99 97,18

0,97 0,88Correlación Fuente: Instituto de Desarrollo Urbano, Bogotá Cómo Vamos, DANE- Encuestas nacional y continua de hogares. Cálculos: Los autores.

Table 9: Transportation and firm creation in Bogotá 2000-2005

AÑO

Creación neta de

nuesvas firmas

Cobertura troncales

Transmilenio

(Km/carril)

Cobertura ciclorutas

(porcentaje meta POT)

2000 8.719 8,23 60,25

2001 10.447 16,87 79,51

2002 9.879 19,48 82,57

2003 11.229 25,06 92,11

2004 12.569 33,28 93,11

2005 11.325 39,99 97,18

0,85 0,88Correlación Fuente: Instituto de Desarrollo Urbano, Bogotá Cómo Vamos y Registro Mercantil, Cámara de Comercio de Bogotá. Cálculos: Los autores.

4.2 Public safety Public safety in Bogotá exhibits constant progress in all the indicators since the decade of the nineties. Figures 36 and 37 show that the rate of homicides per 100,000 inhabitants fell 70%, from 80 to 23.9 between 1993 and 2005; the number of robberies per 100,000 inhabitants was reduced by 36.5%, from 8,653 in 1999 to 5,494 in 2004. Nevertheless, the Colombian capital continues to exhibit a high rate of homicides in comparison to other Latin American cities (see Figure 38).

49

Figure 36: Homicide rate per 100,000 inhabitants in Bogotá

Homicidios/100 habs.

80

69,7

58,9 56,5

47,1

40,5 3934,9

31,327,5

23,9 22,7 23,9

0

10

20

30

40

50

60

70

80

90

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Figure 37: Number of Robberies in Bogotá, 1999-2004

Hurtos a personas 1999 - 2004.

8653

7567

6665

5929 58765494

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1999 2000 2001 2002 2003 2004

Fuente: CCB con base en información del Instituto Nacional de Medicina Legal y Ciencias Forenses (Año 1999). Policía Metropolitana de Bogotá. Centro de Investigaciones Criminológicas (Período 2000 – 2005).. Gráfico: Bogotá Cómo Vamos.

As a result of many factors –safety improvement among them-, Foreign Direct Investment increased over 128% during the past decade –growing from US$ 1,423 million in 1996 to US$ 3,232 million in 2005105. In addition, relevant sectors for tourism such as hotels and restaurants have benefited from a greater influx of visitors to the city, as a result of a better perception of security –between 1998 and 2007, hotel occupation in Bogotá grew from 40% to 70%106-. This has also promoted the development of the health cluster in Bogotá, which is closely linked to the tourism sector107. The health care sector has focused efforts on positioning its services of esthetic surgery, ophthalmology, and dentistry, among others, as high quality services at a fraction of the cost of developed countries, such as the United States. The health care service sector has great potential for the city and it has benefited from a better perception of security. It seems reasonable to think that the consequence of exercising greater safety and the possibility of moving around and enjoying the city, allows firms to exhibit higher levels of productivity, reduced stress of the workforce, lower levels of job absenteeism, as well as lower indices of physical aggression and lower costs related to medical care. Moreover, since a large part of Bogotá’s economy is based on the delivery of services, and some of these –such as hotels, restaurants, healthcare, and education- require close interaction between the one who delivers the service and the client, this industry will progress more with greater safety. When workers and consumers perceive that “the city takes care of them”, it is easier for both to concur in service delivery. Again, when the city is compared to other Latin American cities, Bogotá still remains in the first tier of higher homicide rates.

105

IED, indicador chart 106

Interview with Alexandra Torres 107

cendex

50

Figure 38: Homicide rates per 100,000 inhabitants in Latin America, 2005

Fuente: America Economía Intelligence. Cálculos y gráfico: Dirección de Estudios e Investigaciones, CCB.

Table 10: Safety and per capita GDP in Bogotá, 1993-2005

AÑO

PIB per capita

Bogota (Dolares de

1994)

Número de

homicidios por cada

cien mil habitantes

Número de hurtos a

personas

1993 3.362 80

1994 3.590 69,7

1995 3.581 58,9

1996 3.449 56,5

1997 3.477 47,1

1998 3.446 40,5

1999 2.993 39 8.653

2000 3.025 34,9 7.567

2001 3.002 31,3 6.665

2002 3.065 27,5 5.929

2003 3.095 23,9 5.876

2004 3.150 22,7 5.494

2005 3.438 23,9

0,62 -0,83Correlación Fuentes: CCB con base en información del Instituto Nacional de Medicina Legal y Ciencias Forenses (Año 1999). Policía Metropolitana de Bogotá. Centro de Investigaciones Criminológicas (Período 2000 – 2005, DANE- Cuentas Nacionales departamentales 1999 – 2003 y Cámara de Comercio de Bogotá Cálculos: Los autores.

Table 11: Safety and firm creation in Bogotá, 2000-2005

AÑO

Creación neta de

nuesvas firmas

Número de

homicidios por cada

cien mil habitantes

Número de hurtos a

personas

2000 8.719 34,9 7567

2001 10.447 31,3 6665

2002 9.879 27,5 5929

2003 11.229 23,9 5876

2004 12.569 22,7 5494

2005 11.325 23,9

-0,89 -0,85Correlación Fuente: CCB con base en información del Instituto Nacional de Medicina Legal y Ciencias Forenses (Año 1999). Policía Metropolitana de Bogotá. Centro de Investigaciones Criminológicas (Período 2000 – 2005, Cámara de Comercio de Bogotá. Cálculos: Los autores.

51

4.3 Access to Housing The housing deficit in Bogotá amounts to 327,083 units according to the 2005 census108. Although there has been progress in providing the city’s population access to housing, results are still far from the 2008 goals defined by the District Administration (Figure 39).

Figure 39: Housing Deficit in Bogotá Déficit de vivienda

237.022 227.477 230.974

167.022164.920 160.623 159.158

126.92099.022 90.761 93.074

67.02265.853 57.015 62.146

24.853

0

50.000

100.000

150.000

200.000

250.000

2003 2004 2005 Meta 2008

Vivienda Tipo 1 Vivienda NO VIS

Vivienda Tipo 2 Vivienda Tipo 3

Fuente: Metrovivienda; datos para 2005 son basados en proyecciones SPP - Metrovivienda.Gráfico: Bogotá Cómo Vamos

109

Prior to the decade of the nineties, most of the Low Income Housing –LIH- was built by illegal constructors. This model was reversed through public instruments, such as housing subsidies to promote legal LIH construction and to increase coverage, reaching participations of up to 78% of the total housing supply, instead of the prior average of 10% to 20%; and, thus providing an important part of the population access to dignified homes110. In addition, there are coverage mechanisms –such as escrow accounts- that allow those interested in buying homes to acquire an option in construction projects. Once the point of equilibrium of persons interested in the project is reached, building begins. This construction mechanism softens the boom and recession construction cycles; significantly lowering the possibility of having an idle stock of devaluated properties which, in turn, offer an incentive for debtors to avoid payment111.

108

According to the 2005 census, in that year 1,924,603 families (hogares) lived in Bogotá, but there were only 1,597,520 housing units in the city. 109

Vivienda Tipo 1 corresponde a la destinada a personas con ingresos entre 0 y 2 smmlv; Tipo 2 a ingresos entre 2 y 3 smmlv; Tipo 3 a ingresos entre 3 y 4 smmlv; y Tipo No VIS a ingresos mayores a 4 smmlv. 110

Interview with Andres Escobar 111

Interview with Andres Escobar

52

Table 12: Evolution of the housing stock in Bogotá 1988-2005

Year

Number of housing units in Bogotá

Absolute variation

(number of houses built)

Houses Financed in Bogotá

Total Total Number Share

1988 763.655

1989 790.611 26.956

1990 822.285 31.674

1991 848.857 26.572

1992 870.031 21.174

1993 898.088 28.057

1994 922.102 24.014

1995 979.999 57.897 29.255 50,5%

1996 1.040.331 60.332 29.572 49,0%

1997 1.099.313 58.982 24.576 41,7%

1998 1.161.178 61.865 25.090 40,6%

1999 1.216.043 54.865 12.888 23,5%

2000 1.274.359 58.316 19.794 33,9%

2001 1.332.510 58.151 19.247 33,1%

2002 1.393.994 61.484 27.060 44,0%

2003 1.459.462 65.468 30.643 46,8%

2004 1.525.219 65.757 25.277 38,4%

2005 1.597.520 72.301 24.036 33,2%

Average 1988-2005 49.051

Average 1993-2005 58.286

Source: Interview with housing expert: Ismael Molina

Coverage of public utilities has increased constantly since the decade of the nineties, and is close to 100%. The aqueduct service in the legal city is 100% since the year 2003, having grown 78.7% between 1993 and 2005. Sewage and drain service coverage is above 90%, and has grown constantly (Figures 40 and 41). Energy and gas coverage is outstanding, reaching 100% and 83.5%, respectively, in 2006112. Among the milestones of the city, the Territorial Ordainment Law (“Ley de Ordenamiento Territorial”, Law 388 of 1997) and Agreement 180 of the Bogotá District Council provided the city with better tools to manage urban land. As a result, the city has adopted, fairly recently, a number of institutional legal innovations that will increase the supply of housing solutions at a more competitive price. The legal framework is in place; more decisive action is required here.

112

Website of the City Mayor´s Office. Available at http://www.bogota.gov.co/galeria/gasnatural.pdf

53

Figure 40: Access to water in Bogotá 1993-2005

Tasas de cobertura en acueducto

78,7

81,1

86,2

91,3 91,993,3

95,1 95,1 95,2

98

100 100 100

70

75

80

85

90

95

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: Empresa de Acueducto y Alcantarillado de Bogotá; Graph: Bogotá Cómo Vamos.

Figure 41: Sanitary sewage coverage in Bogotá 1993-2005 Tasas de cobertura en alcantarillado sanitario

70,8

73

77,6

8283

84,585,3

86

87,6

90,1

93,9

9696,9

70

75

80

85

90

95

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: Empresa de Acueducto y Alcantarillado de Bogotá; Graph: Bogotá Cómo Vamos.

Solving the housing problem frees families to direct their resources to the consumption of goods from other sectors, thus promoting growth. Further, the reduction of the housing deficit allows more people to access to health care services113. The reduction of the housing deficit and the increase in the living areas per person has a similar effect as safety in economic performance, since it increases appropriation of the city and improves the lives of its citizens, with beneficial effects on the quality of services delivered by firms. In addition, home owners feel motivated to be more productive, in order to respond for the financial obligation they acquire114. The active participation of the private sector in the construction of low-income housing has reduced the participation of illegal builders, increasing wealth creation in the city115. As a result, the city has saved money, because it is not

113

CENDEX 114

Interview with Nariño 115

Interview with Andrés Escobar.

54

necessary to assign costly resources to provide roads and public services to illegal neighborhoods, which were not prepared for this type of development. The cost of providing public services to illegal neighborhoods is, in average, 160% more expensive than doing so in a legally planned urbanization116. An additional benefit of the legalization of LIH construction is the reduction of settlements in risk zones, since 20% to 25% of illegal urbanizations are built in high risk zones117. An increase in the supply of legal LIH means that families spend less time and money guarding off natural elements, and may direct these resources to activities that increase their productivity118 –such as education- or their quality of life –such as investing in health care. Due to lack of planning in illegal neighborhoods, either there was no place set apart for the construction of schools or the settlement was located very far from them, which meant additional expenditures for families to take their children to school, or in the more critical cases, to opt for not taking them to school. Presently, low income housing is planned near schools, which translates into better learning119. In spite of progress in housing, there is still room for improvement, especially in terms of increasing access of the poorer tiers of the population to the housing supply, and improving quality of housing. As observed in Figure 42, public perception of the availability of housing units and costs offered indicates that people consider that the options available in the market are clearly more expensive than expected and not easily accessible120. In addition, land prices increased between 30% and 62% from 1990 to 2005121. This suggests in a very preliminary way, that Bogotá could have some solutions in the area of massive transportation and even in citizen safety and security, but no one could jump and claim that this is already done in the case of housing.

Figure 42: Perceptions of housing availability 2004-2005

Percepción ciudadana sobre la oferta de vivienda en la ciudad 2004-

2005

68%72%

79%

63% 66%73%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

La oferta de

vivienda para

comprar está por

encima de la

capacidad

económica

Hay muy poca

oferta de vivienda

para comprar

La oferta de

vivienda para

arrendar está por

encima de la

capacidad

económica

Hay muy poca

oferta de vivienda

para arrendar

2004 2005

Housing supply for sale is priced above financial capacity

There is very little supply of housing for sale

Housing supply for rent is priced above financial capacity

There is very little supply of housing for rent

Source: Encuesta de Percepción Ciudadana Bogotá Cómo Vamos, aplicada en junio y julio de cada año. Gráfico: Bogotá Cómo Vamos.

116

Interview with Andrés Escobar 117

Interview with Andrés Escobar 118

Interview with Andrés Escobar 119

Interview with Andrés Escobar 120

Ismael Molina Giraldo. “La vivienda en el desarrollo humano de Bogotá”, 121

Op. Cit. Molina

55

Table 13: Average area per unit of Low-Income Housing in Bogotá, 2001- 2005

Estrato 1 Estrato 2 Estrato 3 Estrato 4 Estrato 1 Estrato 2 Estrato 3 Estrato 4

2001 13,8 14,3 15,9 16,4 17,7 16,7 15,6 15,8

2002 12,3 15,5 15,8 21,6 19,4 17,7 20,3 17,5

2003 13,1 15,4 17,2 22,1 19,3 18,4 21,6 18,2

2004 13,4 15,4 12,9 24,5 19,8 20,1 23,3 18,5

2005 13,3 14,5 15,4 15,1 22,8 19,9 21,7 21 18,0

AñoPromedio

M2 por persona en vivienda VIS (con subisidio)

Apartamentos Casas

Fuente: Documento “La vivienda en el desarrollo humano de Bogotá”, Ismael Molina Giraldo.

Bogotá does not offer great advantages in terms of the cost of office space rent, Office space rents in average for US$ 252 per square meter a year, so that Bogotá is near the average of the most important Latin American cities. The cost of apartment rent (US$ 934) is above the regional average, but much lower than the cost of rent in cities like Lima, Ciudad de México, and Caracas (Figures 43 and 44).

Figure 43: Office space rent prices in Latin American cities

Fuente: CB Richard Ellis. Global Market Rents ; Cálculos y gráfico: Dirección de Estudios e Investigaciones, CCB.

Figure 44: Apartment rent prices in Latin American cities

481 600 676 683 683 704 850 934

2.790

3.518

4.500

100

600

1.100

1.600

2.100

2.600

3.100

3.600

4.100

4.600

5.100

San

tiago

Bue

nos Aire

s

Asu

nció

n

Rio d

e Ja

neiro

Sao

Pau

lo

Mon

tevide

o

Qui

to

Bog

otá

Lim

a

C. d

e M

éxico

Car

acas

US

$

Fuente: The Economist Intelligence Unit Limited, Worldwide Cost of Living Survey. Cálculos y gráfico: Dirección de Estudios e Investigaciones, CCB.

56

Housing is the competitiveness driver that presents a more worrisome state, since it is directly related to the quality of life and the productivity of the work force, and may indirectly affect security in the city. Internally, there is much to improve: quantitatively, there is an important housing deficit; in terms of quality, the areas of living space per person –especially among the poorer population- are minimal. It is difficult for the inhabitants of Bogotá to have access to housing due to short supply or lack of resources. In addition, the city does not offer a great differentiation with respect to costs of other Latin American cities. In the long run, this could be a disincentive for foreign companies that may consider localizing their operations in Bogotá. 4.4 Education The gross coverage rate of elementary and secondary education has increased constantly in the past decade, reaching 98.6% in the year 2005 (Figure 45). Furthermore, the number of spaces available in the universities grew between 1989 and 2001, but the ratio of enrollment to applications did not change much; from this, we conclude that although there is demand for higher education, for some reason people cannot access it.

Figure 45: Gross coverage rate of primary and secondary education

Tasa de coberturtura bruta en educación primaria y secundaria

95,50%94,3% 95,30%

97,10% 97,70% 98,20% 98,20% 98,50% 98,60%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

1997 1998 1999 2000 2001 2002 2003 2004 2005

Fuente: Secretaría de Educación del Distrito. Gráfico: Bogotá Cómo Vamos.

A service economy like Bogotá depends primarily on the capabilities of its human resources, its greater mobility, and its quality of life. Additionally, the city’s economy is greatly influenced by the guarantees it offers to established firms and new firms, and the flows of investment required to undertake new business or to grow existing ones.

57

The close statistical correlation between the improvement of transportation and safety in the city may well result from the economic reactivation experienced since the year 2000. Future research could clarify the quantitative impact of these two variables in the city’s economic performance. The improvement of public transportation has contributed to greater and more efficient mobility, reducing the time of transportation and job absenteeism, and thus increasing business productivity in a service-based economy like Bogotá. Nevertheless, the city faces serious problems like the critical state of its roads, growing vehicle congestion, and the lack of articulation of the Transmilenio Massive Transportation System (STM) and the Urban Collective Public Transportation System (TUPC). Progress in safety has had a notable impact in the city’s economy, specifically in the perception of Bogotá as a safe destination for business and in the increase of investment flows and business travelers. In terms of access to housing, it is not possible to make conclusive comments, especially due to the lack of consistent data. Nevertheless, several hypotheses about the relevance of housing may be extracted from the qualitative information furnished by businesspersons and housing experts interviewed during this project. First, the reduction of the housing deficit may have improved quality of life and productivity of the inhabitants of Bogotá. Second, the increase in participation of legal builders in the provision of low income housing has meant savings for the city administration and for families. This, in turn, has allowed citizens to redirect their resources to more productive areas, such as education. In addition, legal low-income housing is not located in risk zones, which increases quality of life and allows for a better assignment of citizen resources.

58

CHAPTER 5

INSTITUTIONAL ENVIRONMENT FOR COMPETITIVENESS

The competitiveness of Bogotá and the institutions required to support competitiveness are topics that have been systematically developed in the past decade. In one of the first efforts, the Chamber of Commerce of Bogotá hired The Monitor Company of Boston to carry out a study of the city’s competitiveness. There have been diverse initiatives to promote Bogotá’s economic and productive development, but their impact is difficult to quantify in the short term. The main initiatives and institutions that support the increase of city competitiveness are presented below. Monitor Study One of the first approaches to the topic of competitiveness was a study ordered by the national government to the Boston consulting firm, Monitor Company, which used the theories of competitive advantage designed by Professor Michael E. Porter and the firm’s experience in other countries to analyze strengths and weaknesses of Colombia’s competitive environment. The resulting report, “Creating the Competitive Advantage of Colombia: Patterns of Competitiveness and Sector Analyses” was delivered in December of 1993122. Monitor’s study proposed ten strategic imperatives for Colombia: “Go Micro”, promote centers of innovation, promote cluster work groups, improve the quality and mix of local demand, formalize education in strategy, renovate the teaching of management, strengthen specialized training, create a Competitiveness Council at the highest level, develop economic press, and “sell” the image of Colombia. Furthermore, the report analyzed in detail the competitiveness of seven sectors: oil and petrochemical, flowers, leather, textiles, fruit juices, graphic arts, and light metal industries (metalmecánica). As a private initiative, towards the end of 1995 the Chambers of Commerce of Cartagena, Bucaramanga, Cali, Medellín and Bogotá hired Monitor Company to undertake competitiveness studies for their cities. Chamber of Commerce of Bogotá (CCB) The CCB is a private institution that promotes entrepreneurial development of Bogotá and its productive chains, through programs such as: support to the creation of new firms, commercialization of goods and services, strengthening of clusters, and training of the city’s businesspeople. The Monitor study of 1995 and the subsequent contracting of specific studies aimed at strategic selection of the regional productive vocation are among the

122

Centro de Estrategia y Competitividad, Facultad de Administración, Universidad de los Andes. Competitividad de Colombia 2005- Documento de trabajo para el Ejercicio de Búsqueda de una Identidad Competitiva para Colombia. Mimeo. Bogotá, October, 2005. pp. 32-33.

59

most important initiatives advanced by the CCB. These studies helped to define the most relevant, promising, and dynamic clusters, which were used as a basis to select a first phase of successful sectors: business services, housing, healthcare, and pharmaceuticals and other chemicals123. With respect to productive chains, the CCB has centered its efforts in promoting ten high-potential clusters: biotechnology, higher education, manufacturing of metal goods (“metalmecánica”), organic products, high complexity health services, software, textiles and apparel, leather goods, and tourism. Support includes training, information supply, participation in the formulation of projects of interest for the clusters, and cluster mapping to establish the flow of goods, services, and information inside the clusters124. Regional Competitiveness Council and Regional Planning Table One of the great strengths of Bogotá is the willingness of the private and public sectors to cooperate in topics of interest for the city’s development125. Two main initiatives are the result of this joint effort to promote competitiveness: the Regional Competitiveness Council and the Regional Planning Table. These groups work towards strengthening the city of Bogotá and its neighboring regions, mainly the Department of Cundinamarca. In the future, they aim to target the Central Region, composed of the Departments of Boyacá, Meta, and Tolima. The vision of competitiveness for Bogotá and Cundinamarca proposed in 2004 by these groups is “to be in 2015, Colombia’s most integrated region institutionally, territorially, and economically, with a diversified productive base, with emphasis on specialized services and agro-industry, articulated to the global market”. In addition, Bogotá aspires to be recognized as one of the five first cities in quality of life in Latin America, to achieve yearly growth rates of approximately 5%, and to reduce its poverty level by half in 2014126. This vision of competitiveness has six strategic objectives: increase exports, position the region as one of the best investment destinations in Latin America, strengthen the regional economy and improve the productivity of small and medium enterprises by organizing productive chains and clusters in agro-industry and specialized services, raise productivity of the small and medium enterprise, make human resources and science and technology the main drivers of regional development, and build institutional capacity to manage the territory and the regional economy127. Specific goals for the attainment of this vision in 2014 include: multiplying exports from US$ 2,194 million to US$ 10,500 million; increasing foreign

123

Tomado de http://univerciudad.redbogota.com/ediciones/008/opinion05.htm#5 124

Cámara de Comercio de Bogota. Disponible en Internet en: http://camara.ccb.org.co/paginas.asp?pub_id=409&cat_id=279&cat_tit=Apoyo%20a%20las%20Cadenas%20Productivas 125

Julio Cesar Corredor. Asesor de promoción de inversión. Bogotá Región Dinámica. Entrevista personal 21 de noviembre de 2006. 126

Bogotá-Cundinamarca. Hacia una región competitiva: Bases del plan regional de competitividad 2004-2014. Consejo Regional de Competitividad Bogota- Cundinamarca. 2003 127

Ibíd.

60

investment by twenty, passing from US$ 500 million to US$ 10,000 million; effectively executing the business plans of 21 productive chains; improving the city’s productivity ranking from ninth to fourth in Latin America; and, duplicating public and private investment in research and development128. Regional Development Agency “Bogotá Región Dinámica129” Bogotá Region Dinámica is a joint effort of the private sector –represented by the CCB- and the public sector –represented by the City Mayor’s Office and the Governor’s Office of Cundinamarca. This agency was created following a recommendation of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), about the need to have an entity dedicated to local economic development which could lead projects to attract investment, promote exports, and promote the city’s international image and the internationalization of firms. The Agency concentrates on programs to attract investment geared at high-potential sectors, competency development, promotion of key economic clusters, development of places for investment, research and development, and technology transfer. Bogotá Region Dinámica is presently advancing two programs: the Integral Investment Attraction Program and City Brand. The first program aims to exploit Bogotá’s potential as an investment destination, through the implementation of proactive and focused marketing strategies. This program is backed by an agreement between the CCB and MIGA, in which the World Bank agency provides 55% of the funds. It is expected that the program will attract US$ 276 million of new investment during the first three years, and thus increase exports by US$ 355 million, creating 29,000 new direct and indirect jobs. The City Brand initiative intends to develop a Bogotá brand -which is now lacking- that will generate a cultural, economic, and political identity, and that will allow the city to differentiate itself internationally as an attractive destination for investment. In addition, Bogotá Region Dinámica could play a key role in the design and implementation phases of the Agro-industrial Mega-project, as an agent to facilitate promotion and business commitment, execution of business network projects, and attraction of investment towards agro-industrial businesses. Secretary of Economic Development130 Bogotá’s Secretary of Economic Development was created in the District Reform of 2006. It belongs to the Central Administration, is administratively and financially autonomous, and its objective is to guide and promote the formulation of policies geared at economic, business, and tourism development in Bogotá.

128

Ibid. 129

Alcaldía Mayor de Bogotá. Available on the Internet at: http://www.alcaldiabogota.gov.co/sisjur//normas/Norma1.jsp?i=22149 130

Alcaldía Mayor de Bogotá. Available on the Internet at: http://www.bogota.gov.co/portel/libreria/php/decide.php?patron=01.0109061005

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Specifically, the Secretary will work towards the formulation of projects for the development of sectors producing goods and services; in support of business internationalization; promotion of associative processes and support to SMEs; participation in the design of employment creation plans; support in the design of strategies to position Bogotá as a tourism destination; guidance in the creation of policies to attract foreign investment; and, design of strategies to increase access to sources of financing. It is not possible yet to speak of the Secretary’s specific achievements or to quantify its impact in the city’s levels of competitiveness, since this entity was created and had its organizational structure and functions defined on December 29 of 2006 (Decree 552 of 2006). That is, the Secretary has been in operation just over three months. Bogotá Emprende131 The Center for Entrepreneurship “Bogota Emprende” was created by the Mayor’s Office of Bogotá and the CCB at the end of 2006, with the objective of promoting entrepreneurial activity in the city, and supporting firms during their initial phases of creation and growth. The Center provides access to literature related to entrepreneurship, schedules business support activities, and offers counseling to businesses. Bogotá Emprende has defined five main programs: 1) Firm creation; 2) Growth; 3) Consolidation and innovation; 4) Integration to international markets; and 5) internationalization. Like the Secretary of Economic Development, the Center for Entrepreneurship was recently created. It was launched on November 10 of 2006, so it not possible to value its impact on the levels of entrepreneurship or competitiveness of the city.

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Bogotá Emprende. Disponible en Internet en: www.bogotaemprende.com