Engaging the diaspora in internationalizing Colombia’s economy

Colombia’s economic growth over the last two decades was driven by a handful of commodity-based industries, such as oil and metals. This is why the economy collapsed when the US dollar prices for commodities dropped in 2014. The structural weakness of Colombia’s economy can be traced back to a lack of diversification into more sophisticated products and services. The country’s future growth does not, however, have to be inhibited by its past. Many countries have successfully diversified their economies by employing a range of strategies, from foreign direct investment (FDI) to joint ventures to business process outsourcing. Increasing the engagement of the diaspora represents another economic diversification strategy.

Diasporas can play an important role in the economic development in their countries of origin. AnnaLee Saxenian’s pioneering work1 underscores how Indian, Israeli and Chinese diasporas in Silicon Valley have influenced the IT industries in their countries of origin. The diasporas’ economic impact in their home countries is not limited to the IT industry, and certainly not only to Silicon Valley. The recent modernization of agriculture in Albania, for example, can be traced back to return migrants from Greece and Italy, who brought advanced technological know-how with them2, while some of the diversification in manufacturing in rural China can be traced back to Chinese migrants who acquired production skills in the country’s urban areas.3

More recently, a research team from the Growth Lab at Harvard University in collaboration with faculty from the University of California Berkeley and Bielefeld University conducted an empirical study on Colombia’s sizeable diaspora of 5 million people. The key research question was whether Colombia’s diaspora is well-positioned to have an impact on economic diversification at home, and if so, how to best leverage this potential. The study included a geographic and socio-economic mapping of the diaspora based on different types of data on Colombians living abroad: individual-level records representing 1.7 million Colombians included in censuses and labour survey data in the United States, Canada, Mexico and Peru; Twitter profiles of approximately 3.5 million users of (presumed) Colombian origin, and a global database of firms featuring 560 Colombian managers in foreign firms. To elicit information that was not available in official micro-data and social media data, 12 interviews with Colombian transnational entrepreneurs, managers and scholars were conducted in addition to an online survey involving over 11,500 Colombians residing around the globe. To our knowledge, this is the largest survey of a diaspora to date.

Where do Colombians tweet from?4

Colombia is well-positioned to leverage its diaspora to drive economic diversification

We find numerous indications that the Colombian diaspora could positively impact the economy in their country of origin. There are many well-educated—and by now, well-embedded—Colombians in various productive communities around the world: senior managers in corporations spanning from agriculture to technology, entrepreneurs in tech and engineering, scientists and inventors. They have the ability to create strong links between Colombia and highly productive regions such as New York and California in the United States, or London in the United Kingdom. More importantly, despite having spent many years living abroad, many Colombians maintain strong links with their families in Colombia. This balance between the attachment to their homeland and their international achievements could be the key ingredient to impactful engagement of the diaspora.

The best results are achieved when skilled diaspora are engaged while residing abroad

We investigated the factors of professional engagement, such as providing long-distance professional support to Colombians who live in Colombia, for starting a business, investing in Colombia or mentoring youth. We find that (i) previous experience with entrepreneurship (running a business, investing in a business, or having taught entrepreneurship), (ii) attachment to home (regular contact with family, frequent family visits, owning property in Colombia), and (iii) higher levels of education are among the best predictors of the diaspora’s professional engagement in Colombia (first figure below). Interestingly, however, higher levels of education are also correlated with lower interest in permanently returning to Colombia (second figure below), suggesting that the best results in terms of engaging highly educated diaspora can be achieved while they reside abroad.

Travel to Colombia can stimulate engagement

We find suggestive evidence that travel to Colombia can stimulate professional engagement. Frequent travel to the country of origin is positively correlated with engagement, all other factors being equal. However, even after controlling for pre-COVID travel frequency, those who returned to Colombia for COVID-related reasons were significantly more professionally engaged at the time of the survey (figure above). This suggests that the Colombian government could stimulate diaspora engagement by encouraging Colombians who live abroad to travel back home more frequently. Funding entrepreneurship conferences in Colombia, grants for keynote lectures by prominent diaspora members at such conferences and increasing university budgets to invite diaspora and international speakers are some of the many possibilities to stimulate the travel of influential diaspora members.

Diaspora policy as ‘managed serendipity’

Investments in Colombia’s diaspora today are likely to lead to significant opportunities in the country’s future, although it is uncertain when and in what form these would take. The key to leveraging the Colombian diaspora for economic diversification is to establish mechanisms that help nurture the relationships with Colombians who live abroad, both by providing them services that keep them closely connected to Colombia (e.g. recognition of foreign qualifications, double taxation treaties, agreements on pension and benefit transfers, etc.), and by offering channels for engagement that benefit Colombia’s economic development. One option for establishing such channels is the creation of an international business and technology network of Colombians. Members of this network could commit time to build relationships, mentor and help connect local businesses and other local actors with available resources among the diaspora and their foreign partners. This would benefit both diaspora businesses and individuals, providing them with better access to the Colombian economy and the opportunity to support their country of origin’s economic development. Such networks have played a crucial role in the development of the tech industry in Taiwan, Province of China, Israel, India and China, as well as in the creation of business hubs in Ireland and Scotland. The government can signal its appreciation of the Colombian diaspora through public recognition of its achievements abroad and at home. This can increase brand recognition of diaspora entrepreneurs and help them build networks at home, which in turn creates role models for the next generation of Colombian entrepreneurs. When entrepreneurs are portrayed as heroes at home and abroad, more Colombians will aspire to become one.

This piece is based on the working paper The Role of the Diaspora in the Internationalization of the Colombian Economy, by Ljubica Nedelkoska, Andre Assumpcao, Ana Grisanti, Matte Hartog, Julian Hinz, Jessie Lu, Daniela Muhaj, Eric Protzer, AnnaLee Saxenian and Ricardo Hausmann.