After the serious crisis in Colombia's capital markets in the 1980s, the Gaviria Administration implemented an aggressive economic liberalization program known as apertura, or opening, in the early 1990s, including increased promotion of foreign investment. Under Law 9 of 1991, together with administrative resolutions from the Council on Economic and Social Policy (CONPES) and Resolution 21 of the Board of Directors of the Central Bank, foreign companies were put on an equal legal footing with local ones and most sectors were opened to foreign investment, barring only investments touching on security and the disposal of hazardous wastes.
In order to continue boosting the economy, the government has negotiated free trade agreements with several countries. A free trade pact among Colombia, Venezuela, and Central America (except Costa Rica) came into operation on 1 July 1993. In addition, an agreement was signed between Colombia, Venezuela, and Mexico (G-3) on establishing a free trade zone in 1994. In 1993, Colombia, Venezuela, Ecuador, and Bolivia achieved a customs union, with free trade between the four countries under the auspices of the Andean Pact. Effective 1 January 1994, pact members implemented a common external tariff (CET) based on a four-tier tariff range. In June 1999, the clause in the Colombian constitution permitting expropriation without indemnification was repealed opening the way for ratification by Colombia of bilateral investment agreements (BITS) with Peru, the United Kingdom, Spain, Cuba, and France. Negotiations on a BIT with the United States were still ongoing in 2003. Columbia ended its monopoly over telecommunications in 1998, limiting foreign ownership to 70%. In 2003, the US Trade Representative (USTR) was raising objections that restrictions on foreign entry into Colombia's telecommunications sector violated its obligations under the World Trade Organization.
The industry most heavily invested in by foreigners is the petroleum industry, which saw international investment grow from $458 million in 1993 to $890 million in 1997. In 1996, CONPES eliminated the requirement of government authorization for investment in public services, mining, and hydrocarbons. Despite this allowance, investment in the hydrocarbons sector requires an association contract with the state-owned oil company ECOPETROL. Due to the apertura program, the sectors that have seen the largest growth in international investment have been infrastructural. Investment in the utilities sector (electricity, gas, and water) leapt from $145 million in 1996 to $2.3 billion in 1998. The transportation and communications sectors, which have been mostly privatized in recent years, grew from $5.7 million in 1993 to $360 million in 1997. The increased foreign investment coincided with increased borrowing in foreign financial markets (enabled by the opening of the financial sector in 1991) and a large inflow of capital from increased petroleum exports. The excess liquidity led to a credit boom and a sharp increase in interest rates, which rose yet further as the Central Bank tried to support the peso's exchange rate. Aggravated by political uncertainty, the economy was in another financial crisis by 1998.
Annual direct foreign investment (DFI) inflow reached a peak of $5.56 billion in 1997 and then fell to $2.83 billion in 1998 and to $1.47 billion in 1999. For 2000 to 2002, average annual FDI inflow was about $2.2 billion. FDI inflow from the United States in 2002 was $317 million.
Security concerns remained a major deterrent to foreign investment in 2003 as the government continued its 40-year fight against two major leftist guerilla groups that had come to control about half of the country. In 2003, hostage taking and hostage execution involving increasingly prominent individuals and a bombing in a Bogotá nightclub indicated the penetration of guerilla activity into major urban centers. In June 2003, as part of a $98 million military aid package, the United States sent about 60 Special Forces members to train local soldiers to guard the Occidental Petroleum pipeline; the Cano Limon pipeline, which had been bombed 40 times in 2002; and 170 times in prior years.
In terms of portfolio investment, the total market valuation of companies listed on the Colombia Stock Exchange peaked in 1997 at $19.5 billion (189 listed companies) and had fallen to $9.56 billion in 2000 (126 listed companies). In 2001, total market valuation had risen to $13.2 billion with 123 listed companies, but turnover was at a record low of 3.2%.