1. 1997-1999 Crisis

2.  Government: Republic  Capital: Bogota  Independence from Spain: July 20 1810  Legal system: Spanish law. However, a new system that is modeled after U.S. law was adopted in 2004.  Population: 43.6 million

4.  El Niño damages increased food prices and exacerbated the agriculture sector.  Expansionary Fiscal Policy: pushed by new oil discoveries and development.  Healthcare  Education  Other infrastructure  East Asian Crisis  Foreign investors feared of contagion throughout LDC’s.

5.  Liberalization & Credit boom (1991-1997)  Total credit rose from 29.1% to 43.1% of GDP.  Past due loans and non performing loans hit high levels. This led to a 31.1% net worth loss in the financial system.  Large fall in the price of oil, coffee, and coal.  Price of oil Declined from US$ 18.2 per barrel in 1997 to US$ 11.5 in 1998. Oil exports did increase some 24% in terms of volume. However the increase was not enough to offset the decrease in the price of oil

9.  The speculative attacks on the Colombian peso lasted nearly two years: 1997 - 1999

14.  Contractionary monetary policy.  1998: M1 contracted by 4%, whereas in 1997 it had grown by 21.7%.  Lending rates increased from 33% to 45%, which was the highest level observed throughout the decade.  Fixed-term deposit interest rates increased from 24% to 36%.  Decreased the limits of the exchange rate band

15.  IMF bail out package of US$ 2.7 billion: (1999 -2002)  Help conditional on  Tight spending policy  Strong tax enforcement  Control of resources under a fiscal decentralization system.  Adoption of a free float  Inflation targeting

19.  Inflation decreased from 9.5% in 1999 to 5.5% in 2004.  The Colombian peso continues to devalue.  GDP has grown at a poor rate.  Financial institutions decreased from 110 in June of 1998 to 57 by 2001. This is the largest financial crisis that Colombia has faced during the last century.