This is the total amount of goods and services produced in a country during a given period of time. It includes production generated by national residents in the country and foreigner’s resident within the country but excludes production of Colombians resident abroad.

This is the most general indicator of inflation and deflation, because it takes into account all the prices of final goods and services produced in an economy.

- It is a very complete measure.

- It is a very refined calculation because it only includes final production, and in this way eliminates any duplications generated by certain products that also serve as inputs in the production of other products during the same period referred to by the indicator. As can be observed, this is an index that requires hard work as regards the consolidation of economic activities developed in the various sectors of the system.

In general trading systems have different divisions according to the market that they affect. Within each trading systems there are other smaller trading systems that deal with different markets, and therefore trading systems can be divided into the following:

Currencies trading system
Legal currency trading systems
Public debt trading system
Corporate trading system

Each of these deals with different markets, as follows:
Currencies trading system: In Colombia it is normal for the currencies trading system to negotiate in dollars and other currencies.
Operations in dollars are carried out by means of electronic systems (SET-FX), by brokers (Gesmosa – CIMD) or by direct telephone trading. The Spot market (real time commodity market) opens at 8:00 A.M. and closes at 1:00 P.M., the market trades in t = 0 (today) and the operations are completed in t = 0 (today). In the afternoon the Next-day market operates, which opens at 2:30 P.M. and closes at 4:30 P.M. In the Next-day market operations are carried out in t = 0 (today) and are completed in t + 1 (tomorrow). Each intermediary makes offers (points) at which price they are prepared to buy and/or sell their dollars, whilst indicating the amount to be traded.

The currencies trading system also intervenes in the other currency trading system, where currencies other than the dollar are traded, such as: the Yen, the Mark, the Euro, the Franc, the Pound Sterling, etc. Trading is generally carried out by means of electronic system (Reuters) or by direct telephone operation. Operations with other countries can be carried out, market conditions permitting.  These are generally markets with time schedules that are compatible with international markets.

Finally, another market that operates in the currencies trading system is the derivatives market, where fixed term operations and operations with other types of instruments are carried out, such as the following: forwards (Delivery and Non-Delivery), swaps, Put and Call Options (American or European), amongst others.

Legal currency trading system: In Colombia this trading system is responsible for carrying out operations in pesos. The traders seek resources or lend treasury surpluses to other entities. They are responsible for the monies on call or the fixed term resources that the other trading systems can use. Legal currency trading systems define the rates which each entity can hold in their offices each day, define loan rates as well as defining the amounts which should be requested or placed in the Banco de la República during the day. They use repos in order to cross-position between entities or simply approach the Banco de la República for resources. This market generally operates after 10:00 A.M. and closes after 6:00 P.M. Transactions are carried out directly or by telephone between the parties involved. This is a disadvantage for this market, as this does not allow for the prices and quantities to arrive at a profound and liquid market and can sometimes lead to excessive costs.

Public debt trading system: In Colombia, government treasury bonds (TES) of 1, 2, 3, 5, 7, 10 and 12 years are traded. The transaction system is carried out by means of the Electronic Negotiation System (ENS), but brokers and direct telephone transactions can also be used. The market trades firstly from 8:00 A.M. until 1:00 P.M. although other operations are carried out during the afternoon. Different types of bonds are bought and sold according to each entity’s strategy. Those responsible for participating in the primary adjudication auctions of government treasury bonds (TES) operate in this trading system. They must be in permanent contact with the legal currency trading system in order to determine the amounts and volumes to be sold and/or bought. By means of the ENS, each agent makes different quotes according to the bond to be traded, indicating the amount, price and term for operation. When operations are carried out by means of ENS, compensation for operations is on-line.

Corporate trading system: This trading system is responsible for the distribution of the entity’s different products. It is responsible for the management of the entity’s clients, either from the real or financial sectors. It must be in contact with the other trading systems, in order to be able to provide better services to its clients. It operates during the day, bearing in mind the time schedule required by its clients.

The currencies, legal currency and public debt trading systems are also referred to as generating trading systems, due to the fact that they generate the prices for the different markets.

Corporate trading systems are also referred to as distribution trading systems, due to the fact that they attend to clients and distribute the products of the other trading systems.

The trading system of the Banco de la República is divided in two:
An investment trading system where Banco de la República’s portfolio is managed in currencies other than the legal currency and which belongs to the International reserves Department, and the money trading system, without further divisions, and which is part of the Markets Operation and Development Department. Operations relating to legal currency, peso-dollar and public debt are carried out within this department.

The Banco de la República does not have a corporate trading system, given that its clients are banks with which it does not have a commercial relation at the level of a private bank with a company.
The legal currency trading system is responsible for carrying out operations of monetary expansion and retraction (repo).
The peso-dollar part is responsible for watching over the behaviour of the peso towards the dollar and has intervention mechanisms in case of sudden volatility in the exchange rate.
The public debt part administrates the Banco de la República’s portfolio in Government bonds and manages the primary auctions of MHCP and Fogafín.

This treaty, signed by Canada, Mexico and the United States, seeks to consolidate a common market for the free circulation of merchandise, services and capitals, including a bigger opening in investment opportunities. This treaty can be considered as a precursor of the development of the "Initiative for the Americas" proposed in 1989 by the former President of the United States, George Bush, with the purpose of creating a free market zone in the American hemisphere, from Alaska to Patagonia.

The Andean Pact was created in 1969 in reaction to the practical difficulties of achieving Latin America integration. Initially it was made up of Bolivia, Colombia, Chile, Ecuador and Peru, but later Venezuela joined and Chile retired. After an auspicious beginning, the process got stuck, especially during the 1980s when countries experienced great difficulties in the external sector, which led to the systematic breach of their commitments. Nevertheless, since the end of that decade, and thanks to the political stimulation provided by the different countries’ presidents and based upon more flexible foundations, Andean sub-regional integration acquired renewed impetus and countries took on commitments aimed at consolidating the extended economic space. In order to achieve this, initial efforts were made to improve the Andean Free Trade Zone by means of a liberation programme (reduction and elimination of tariffs between member countries) and by the adoption of a common external tariff (the tariff charged on merchandise from third countries) with the final aim of creating a customs union. Likewise, the Pact plans to dismantle lists of exceptions progressively and also to establish gradual harmonisation of economic policies. Within the group, due to their stronger commercial exchange and economic interdependence, Colombia and Venezuela decided to deepen and speed up their bi-national integration, facilitated by the approximation of their macroeconomic policies, and their dynamic economies, in such a way that the exchange has made unprecedented progress since the 1990s. This has given rise to considerations of proposals for payment schemes using national currencies (the de-dollarisation of trade) with the aim of speeding up and reducing the cost of making payments. Likewise, the sphere of exchange has extended itself to investment projects, the placement of bonds and the acquisition of Colombian financial institutions by Venezuelan capitals. All of this makes future consolidation of this process of economic unification even more likely. Similarly, progress has been made with great determination in the harmonisation of macroeconomic policies, even though areas remain where it is difficult to make quick progress, due to varying results.

At the end of 1990 Colombia, Venezuela and Mexico established a group for the consultation and coordination of the regional situation. This situation has evolved towards more ambitious goals for economic integration and the consolidation of a free trade zone towards the end of the 1990s, including not only goods but also services.

This is a gradual process implying delicate negotiations to enable the adaptation of the productive apparatus of the different countries. Special treatment for sectors with significant initial differences (for example, iron and steel, automobile and petrochemical sectors), as well as for aspects where differences in legislation imply difficulties for a speedy opening (for example, in the offer of financial services) need to be taken into account.

The purpose of establishing a unified market in Central American countries is even older than the Latin American Integration Association (ALADI) since it dates back to 1951, but its realisation has been hampered by serious political events and external factors. Nevertheless, since the end of the 1980s, adequate conditions have arisen in order to resume the route of regional integration inspired in a joint projection towards the countries external to the area. Accordingly, the presidents of Central American countries have indicated that a free trade zone must be perfected and the regional common market must be used in order to achieve better insertion in the world market.

A phenomenon of great significance in the process of shaping the world economic order for the XXI century has been the consolidation of the Pacific Asian countries as a new centre of enormous productive and technological potential which has already acquired a notable prominence in the contemporary world's trade currents. It is not a formal association of countries seeking the unification of their markets, but a nucleus with joint and interdependent dynamics, which has acquired a determining gravitation in the economic and commercial life of the world. The leader of this group of countries is Japan, and the group also includes recently industrialised countries of Southeast Asia, such as Taiwan, Korea, Hong Kong and Singapore, and the four members of the Association of South-eastern Nations (ASEAN), Thailand, Malaysia, Indonesia and the Philippines. The relative weight of this set of countries could still increase in a substantial way if China’s economic emergence can be consolidated, and if the efforts made by India to join this movement bear fruit. In fact, this phenomenon could involve the Australian continent, traditionally linked to the West. For Latin America, this perspective must not be ignored, and for this reason it is of great importance to begin increasing links with the countries of the Pacific Basin that offer incalculable trade potential.

As mentioned previously, parallel to this phenomenon of blocks and regional integration, there is a tendency toward cohesion and interdependence on a world-wide scale. To support the latter process, after World War II, a General Agreement on Tariffs and Trade (GATT) was signed in 1947 by 90 countries. The purpose was to stimulate a more open, stable and transparent trade regulation on a world-wide scale, and to fight protectionism and discrimination, so that, based on trade expansion, a more complete and efficient use of world resources would be facilitated, thereby resulting in higher levels of employment, income and human welfare.

In order to achieve these objectives, GATT envisaged the signing of agreements aimed at obtaining a substantial reduction in tariffs and other trade barriers as well as the elimination of all discriminatory treatment in international trade, based on reciprocity and mutual benefits. The agreement envisages a set of rights and obligations (or codes of conduct) that must be respected by the signatory countries (the parties) and mechanisms for the solution of controversies. More specifically, GATT serves as the framework for the implementation of general negotiation rounds between member countries. Eight such rounds have now taken place, the last of which, the Uruguay Round, began in September 1986 in Punta del Este (Uruguay). This Round culminated in April 1994 after a slow and arduous negotiation process that allowed the United States and the European Union to reach an agreement regarding agricultural production and trade policies. Even though the achievements of this Round were lower than the initial objectives, important progress was achieved, bearing in mind the resurgence of protectionism and trade distorting practices in recent years, mainly in developed countries. It is worth mentioning that Colombia adhered to GATT in 1981.

As from 1995, GATT has been replaced by the World Trade Organisation (WTO), a multilateral organism at the same level as the International Monetary Fund and the World Bank. This organism seeks to deepen the process of trade liberalisation between nations so that it may contribute to a greater extent to stimulate world economic growth. Among its objectives are the following: liberalisation of agricultural trade, elimination of protectionism measures other than tariffs and quotas and the strengthening of solution mechanisms for trade disputes between nations. Likewise, it seeks to extend its range of action to the exchange of services, the movement of capitals and technology and environmental measures related to world trade. It is hoped that this new entity will provide a stable legal basis for trade relations between all countries and re-launch world economic growth, bearing in mind new tendencies concerning the opening up of trade, globalisation and competitiveness between nations. 

Latin American countries created the IDB in 1959 in order to promote the investment of public and private capitals in development projects in the hemisphere and to co-operate with member countries to orientate their policies towards a better use of resources. The Bank also has extra-regional members which, together with the United States and Canada, act as providers of resources. Colombia has been a member since its foundation. There are similar regional development banks in other regions of the world, such as for example, the Asian Development Bank (ADB), the African Development Bank (AFDB) and the Caribbean Development Bank (CDB).
 

The Agency for International Development is a body of the United States Government, which provides a series of funds destined to provide financial and technical assistance to more than 70 countries in Asia, Africa, Middle East, Latin America and the Caribbean. It seeks to support projects that aim to satisfy basic human needs and the economic growth of these countries. Colombia has made use of USAID’s services on several opportunities.

The Andean Development Corporation’s members are the signatory countries of the Andean Pact. The ADC’s fundamental objective has been to finance industrial projects related to the trade integration process between the five countries. Colombia is a member since its creation.

Here is the link to access ALCA’s homepage.