That is, despite the many negotiations and cessation of payments of the nineteenth century, the level of external indebtedness of the country was the lowest in the region, as shown in figure 20.
The beginning of the century was also marked by the War of a Thousand Days (1899-1902), which was partly financed by external debt.
However, compensation for the Isthmus of Panama (1923-1926) and the rise of coffee cultivation since 1905, meant an inflow of capital to the country that reduced the amount of debt.
This coupled with the strong performance of the balance of payments, increasing the financial capacity and reform of the Government of Rafael Reyes allowed strictly comply with the debt servicing during the first two decades of the century. This allowed the country to begin to regain its lost credibility.
Figure 21 shows the behavior of debt between 1923 and 2003. During the twenties there was an increasing flow of foreign credit was used to fund various public works programs, a period which is known as’ The prosperity must.
Towards the end of 1928, the external price of coffee began a phase of slow decline, resulting from the mismatch between capacity and demand for grain (Posada 1989, 78).
Added to this, excessive debt and spending led to increased inflation, which was disturbed by the lender in the U.S. bond markets in New York.
Since 1929, external debt began to decline, causing a reduction in domestic bank credit, the stagnation of the nascent stock market in Bogota and Medellin, and the reduction of reserves of the Bank of the Republic.
Given these signs of recession, the Government established a Olaya economic plan in 1931 that included the postponement of debt repayment, purely in the interest.
This postponement of payments initiated moratorium by statements of departments and municipalities that lasted until 1935, which coincided with the general international situation of countries who declared a moratorium on the debt, not only in Latin America, but also Eastern Europe, among others (Avella, 2006).
The departments and municipalities in 1928 had 31 and 11 per cent of total debt respectively in Colombia, after significant growth, as shown in Table 1.
With all this, between 1928 and 1935 the debt reached around 15 per cent of Gross Domestic Product. After nearly 30 years of substantial debt reduction, between 1962 and 1972 saw further growth in the balance by placing an average of 13 per cent of Gross Domestic Product.
Additionally, during this period the country had access to credit from external multilateral agencies and private banks.
By 1970, the amount of private external debt was close to the public, although in general the country’s external debt has been primarily an obligation of the public sector, as shown in Figure 23.
Between 1974 and 1978 carried out a major tax reform during the administration López allowing a reduction in external liabilities, which was overshadowed by a new cycle of indebtedness during the Turbay government in the early eighties. Throughout this decade, the debt contracted by Colombia rose and remained at an average of 15 per cent of GDP between 1984 and 1986.
This growth in debt was moderate and coincided with the collapse of the external debt of Latin American countries, starting with the debt that Mexico had made with United States, given the high interest rates.
Thanks to the external debt was relatively small, Colombia was one of the few countries to overcome the crisis without going through a restructuring program, which allowed access to a new flow of external debt contracted with the international private banking.
The period between 1988 and 1992 had important institutional changes directed towards greater openness to international markets.
During this period, external debt flows have stagnated and the policy of financing the public sector was reoriented towards the replacement of external debt by domestic debt.
The debt increased substantially between 1993 and 1998, under the policy of internationalization of the economy and in a context of large public investments.
In late 1997, the world economy faced a deep financial crisis that affect the growth of the Colombian economy, its fiscal and external debt.
Private investment, growth in Gross Domestic Product and private debt flows decreased, while the government debt increased as a result of growing fiscal deficits.
This situation led to debt levels exceed 50 percent of Gross Domestic Product, a level unprecedented in history.
In 2005 the external debt stock of medium and long term was 47.6 billion pesos, equivalent to about 54 percent of the Gross Domestic Product, ie, debt per capita is close to 1′920 .000 pesos.
The situation improved dramatically with the 2003-2008 boom, which among other things, the Colombian peso appreciated and so important for relieving the external debt fell to levels 30 per cent of GDP in 2007.
By way of summary, the monetary, fiscal and external debt throughout the twentieth century was relatively moderate when compared with that of many Latin American economies since the seventies began to produce large macroeconomic imbalances that ended in and widespread financial crisis, into a painful phase of stop and go in relation to economic growth.
However, the historical record of Colombia is also not brilliant, and once became a subject of international credit, his conduct left much to be desired: lived with moderate inflation, but persistent, occasionally resorted to financing with the issuance of the Central Government and had too small a State to the nineties of the twentieth century.
Having agreed a major expansion of social spending, financed social security and especially the challenges of insurgency and drug trafficking, entered into a deficit of central government structures to ward refused despite the exceptional bonanza that the country experienced between 2003 and 2007.
Given these policies, we will study how economic growth was during the twentieth century and how it was driven, first by foreign trade, but later became a brake, because the country ceased to enjoy favorable terms of trade and was poor quality of its trade policies for a while and then encourage exports and to allow freer trade between the country and the rest of the world.
