Investigaciones de Historia Económica (IHE) Journal of the Spanish Economic History Association
During the 1920s, the Colombian economy experienced the highest growth rate in its history. The economic reforms of 1923 (central bank, gold standard, banking legislation, fiscal reorganization), a coffee boom, and an unprecedented influx of foreign capital were the driving forces behind this success. The loans obtained by 1929 amounted to 257 million dollars. Those funds were used mainly to build much needed infrastructure, particularly railroads. In this paper, we estimate the rates of return of the investments made in Colombian railroads during the period 1924–1950. We consider that Colombia ended up paying only around 85% of the loans obtained in the 1920s, owing to the suspension of foreign debt payments; as a result, the profitability in the construction of railways was higher. The rates of return on the railroads constructed and extended in the 1920s are comparable to those obtained for European countries in the nineteenth century.