Short-term, the picture is even brighter. Colombian “real” gross domestic product (GDP) growth was 7.0% in 2007, or about 5.6% per capita. In 2008 and 2009, The Economist expects growth of about 4.0% to 5.0% in each year, but that’s still enough for a smart improvement in living standards.

Inflation is currently running at 6.7%, perfectly acceptable in a global commodity price boom, while short-term interest rates are almost 10.0%, well above the inflation rate, showing that Colombian monetary policy is sufficiently tight to bring inflation down – rather than pushing it along, as most other countries are currently doing.

Its payments balance is minus 2.5% of GDP and its budget deficit is 1.0% of GDP, both perfectly acceptable figures. Finally, Colombia ranked 68th on Transparency International’s 2007 Corruption Perceptions Index – not wonderful, but above all four BRIC economies (Brazil, Russia, India and China).

In terms of products, Colombia’s principal exports are oil, coffee, apparel, flowers and minerals. Its oil exports are double its imports and – unlike its neighbor, Venezuela – it is welcoming foreign oil companies, which are investing heavily and are now finding more reserves than are being depleted annually.

Colombia is friendly to the United States, also. Indeed, the United States is its largest trading partner, and the two countries currently have Free Trade Agreement pending Congressional approval.

The bottom line is this: While Colombia’s growth rate is only moderate, it has under President Uribe been the best-run country in Latin America and has benefited economically from this. Uribe’s second presidential term expires in 2010, but he remains popular, and the betting is that he will pass the baton to a like-minded successor.

The bad news for investors is that not many Colombian companies are quoted in New York, and the market represents too small a part of the global total to have an exchange-traded fund (ETF) all to itself.

The IGBC General Index of Colombian shares is down 20% from its 2006 high but is up 350% over the last five years. The SPDR S&P Emerging Latin America ETF (AMEX:GML) invests in Colombia, but that country represents only around 10% of the fund’s overall holdings, and it also has holdings in other far less attractive countries.

The only Colombian company with a full American Depository Receipt (ADR) listing is Bancolombia SA (ADR: CIB), the country’s largest bank-holding company. The stock is attractively priced, with a forward Price/Earnings (P/E) ratio of around 9.0 and a dividend yield of 3.7%.

Other Colombian companies whose shares trade as pink sheet stocks include Corporacion Financiera Colombiana SA (Pink Sheets: CRPFY), a bank stock that seems to be a reasonable value with a P/E of 11 and a dividend yield of 8.0%.

Then there’s also Interconexion Electrica SP (Pink Sheets: IESFY:PK), an electric utility that seems a bit expensive at 30 times earnings. However, Interconexion is expected to undergo a privatization sale by the government in 2009, which may make it both more liquid and a better value.

Both Financiera and Interconexion trade infrequently in the United States, but they are fairly liquid if you can get your broker to buy the shares on the Bogota Stock Exchange.

More one to watch than one to pile into immediately, but a modest investment in CIB (Bancolombia) would seem a good safe bet.

Source: Colombia: Latin America’s Hidden Gem for Investors