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Colombia Voted For Economic Growth And Security In Last Election

Bogota, the capital of Colombia

Colombia a nation of more than 49 million people and a country rich in natural resources, has enormous potential as an export giant and economic power. In order to fulfill this promise, investments from both within and from abroad, must be promoted. However, foreign investment is dependent on a legal framework, that supports growth and above all security.

Former President Juan Santos had become term limited, and once again Colombian voters were being asked to choose between the policies of the left and policies on the right. The nation had experienced an incredible economic boom earlier in his tenure and only towards the end, did growth slow substantially.

Colombian President Ivan Duque

In the May 2018 presidential elections, the voters of Colombia were asked to choose between former Bogota mayor Gustavo Petro, who once was a leftist militant himself and the conservative Ivan Duque.

In the second round of voting in June, Duque secured 53.9% of the vote, while his opponent came in with just 41.8%. It was a particularly strong showing for the socialist candidate.

The two men held the future of Colombia in their hands. One candidate wished to move the country to an economic model similar to Bolivia and Ecuador, the other one wanted to continue an earlier path, set down by his mentor, former President Alvaro Uribe.

President Uribe who was in office from 2002 to 2010, is credited by many as the man largely responsible, for much of the present economic growth and stability of Colombia. This fact is underscored by a poll held before the election, which indicated that one in five voters, would support the candidate endorsed by Uribe.

Gustavo Petro

In the first round, Petro was able to capture 25% of the vote against the 39% cast for Duque. Worryingly, for conservatives a third more moderate candidate took 23% of the electorate. Sergio Fajardo seemed to be the compromise politician, between left and right. If these voters cast their lot with Petro in the second round, his electoral victory seemed within reach.

While the voters of Colombia are somewhat united, in their overall distrust of establishment politicians, the choice facing the electorate, was quite simple.

Would they prefer the market-friendly economics and strong internal security platform of Duque or the wealth redistribution and supposed social justice, offered by Petro?

As Petro blasted the multinational mining companies operating in Colombia and stated how large foreign investors, were unfairly profiting from the prosperity of the country, Duque was touting the benefits provided by these investments.

Augusto Pinochet, military dictator and President of Chile 1974-1990.

There are two constant reminders of political reality, within Latin America. Once leftist socialists come to power in a country, they are loathe to relinquish it. The other is the same can be said, for the usually more conservative military.

It was rather difficult to dislodge the military dictatorships in Argentina, Brazil, Chile and Paraguay. At the same time, the leftist hold on power in Bolivia, Ecuador and Venezuela, has proved to be equally tenacious.

Unfortunately, for the leftists seeking political power in Colombia, voters need to look no further than neighboring Venezuela, to see the end game of leftist socialism gone amok.

The more than one million economic and political refugees from Venezuela, are a constant reminder of these failed socialist experiments.

It is no mere coincidence, that Petro was once a vocal supporter of former late Venezuelan President Hugo Chavez. Colombians are well aware, of how Chavez took a thriving economy and ran it into the ground.

Hugo Chávez, socialist President of Venezuela 2002 -2013

Although most of the blame is now being placed on his successor, the beleaguered President Maduro, he is simply following the policies, set in place by Chavez. The only difference is the lower prices paid for crude oil and the unwillingness of foreign governments, to extend further credit to the collapsing regime.

In the end, the majority of the Colombian electorate was once again, able to resist the siren call of the socialist agenda. An expanding economy and rising middle class, helped to bring this about.

The question that must be answered, will this still be the case as the domestic economy slows in the face of rising protectionism and a global economic slowdown? Will the Colombians maintain faith in their institutions, as their own personal fiances sour?

Worst yet, for the Colombian economy is the decline in growth for investment, going from 9.8% in 2014 to an actual -2.7% year to year in 2016. The slight recovery of 0.1% in 2017, although improved, still must be worrisome for the government.

GDP growth in Colombia from 2003- 2012

The Colombian economy has slowed considerably since 2013 and 2014, when growth rates reached 4.6% and 4.7% respectively. Growth dipped to 3% in 2015 and further in 2016 at 2%. The downward trend continued in 2017, with the GDP (Gross Domestic Product) coming in at just 1.8%.

On a positive note for the new President Duque, it is estimated that the economy did rebound somewhat in 2018 and will post somewhere near 2.7%.

GDP per capita has suffered as a result, going from the equivalent of over $8,000 USD (United States Dollar) in 2013, to below $6,500 USD in 2017.

The total GDP of Colombia remains in excess of $300 billion USD, but the slowdown in overall economic growth, should be an increasing concern for the political leadership of the country.

Colombia has the fourth largest economy in Latin America, after Brazil, Argentina and Mexico. In the last decade,it has surpassed Chile, to become the third largest economy in South America.

However, for the people of Colombia like elsewhere, what matters most is their sense of economic well being. This can be best measured by the PPP (Purchasing Power Parity). Colombia has become the fifth richest country in Latin America, coming in at $13,579 USD in 2018.

In comparison, Chile touts a level of $24,588 USD followed by Uruguay at $22,445 USD. These two countries alone in South America, can claim the status of being developed nations.

Fiscally, tumultuous Argentina is next at $19,486 USD, followed by Brazil at $15,164 USD.

A major problem for the government of Colombia is unemployment, especially among the youth. Even when the economy was booming in 2013 and 2014, joblessness remained above 9%. This was at a time when the country had the fastest growing economy in the Western world.

Unemployment did dip to a low of 8.9% in 2015, but has since returned to over 9%. This makes the rate in Colombia, the second highest in Latin America after Venezuela. In addition, it is important to note, that another 8.5% of the population remains underemployed.

The Colombian economy has become increasingly reliant on trade, as a source of growth for the economy. Energy and mining exports are crucial, but these fluctuate greatly, with global prices of commodities.

Colombia is the fourth largest oil producer in Latin America and the world’s fourth largest coal producer. Crude oil alone, comprises 45% of Colombia’s exports. The country remains the third largest exporter of coffee after Brazil and Vietnam and surprisingly, the second largest in cut flowers.

Manufacturing makes up nearly 12% of the country’s exports and has grown an average of over 10% annually. The nation remarkably, has one of the largest shipbuilding industries outside of Asia

Carnival in Colombia

Colombia can also boast the fastest growing information technology industry in the world and has the longest fibre optic network in all of Latin America.

Another fast growing sector of the economy that shows great promise, is tourism. It has become big business in Colombia, with the number of foreign visitors growing over 12% every year. However, recently, there has been a dramatic surge in the numbers, growing from 4 million to 5.3 million over the last year alone, equaling an increase of 32.8%.

By 2023, it is estimated the country will host over 15 million people on an annual basis.

Further development of the domestic economy, is being somewhat restrained by a number of obstacles, that remain challenging to overcome. The first is inadequate infrastructure, which can best be financed with continuing economic growth or additional foreign investment. Although progress is being made, the decline in outside money for development, is notable.

Informal brick housing in Colombia

Poverty is another intractable issue that has remained, despite years of remarkable economic growth. There had been a steady decline from a rate of around 65% in 1990 to under 24% by 2015 by official statistics. Recent figures indicate a leveling off, which is problematic.

Other sources have 34% of the country, still living below the poverty line. It is estimated that three out of ten Colombians, still live in poor conditions. Colombia remains, the seventh most inequitable country globally.

Out of 3.8 million households inside the country, nearly 30% of all families, do not have adequate housing and a full 5% are actually homeless.

Despite this, one important statistic for those Colombian politicians who favor capitalism to remember, it was economic growth, that was responsible for the 70% of extreme poverty reduction, achieved between the years 2002 to 2013.

Colombian poverty rates, 2002-2016. Income-Based Poverty, Extreme Income-Based Poverty, and Multidimensional Poverty

Yet, more than 12.7 million people in Colombia, still live on less than $2.00 USD a day. In rural areas of the country, 7 million people live in poverty and 2 million in extreme poverty.

The third ongoing issue, not yet fully concluded is civilian insurgency, that has continued for over half a century. The largest movement FARC (Revolutionary Armed Forces of Colombia -People’s Army), is the longest in the history of Latin America. This arm of rebellion, largely ended in 2017.

The problem of political insurrection has cast a long shadow on the Colombian economy and politics.

The World Bank has estimated for example, that if the country had found even 20 years of peace during this destructive uprising, the income per capita in Colombia, would be at least 50% higher than it is now.

Former President Alvaro Uribe

Since 1985, over 7 million Colombians have been displaced. People are subsequently forced to migrate to urban areas and often create informal settlements, which become breeding grounds for crime, drugs and poverty.

The issues swirling around the insurgency movements, have brought political strife among both allies and opponents. A perfect example is the relationship between former Presidents Uribe and Santos. The latter was a protege of his predecessor Uribe.

However, within months Uribe became a strong opponent of Santos. One of the issues that would separate them was, how to deal with the insurgency movement within the country? Three years later, Uribe would found a new party of opposition, known as the Democratic Center.

This rivalry poisoned the 2014 elections, where the now unpopular Santos, was almost unseated by Oscar Zulaga, a new protege of former President Uribe.

Oscar Zulaga

A crowning achievement for Santos came in October 2016, when he was awarded the Nobel Peace Prize. It was for his efforts in negotiating a peace agreement with FARC. This was despite, the unsuccessful referendum held over the deal. The No campaign was led by none other than Uribe’s Democratic Center Party.

In November, the Colombian government under direction of Santos, decided to move forward with a revised peace treaty with FARC, regardless. Instead of conducting a second referendum, it was decided to send the new agreement to the Congress for ratification. It passed and thus officially marked the end of the conflict.

Santos may have been proud of his controversial achievement,but as a result, he left office with a presidential approval among the lowest on record.

FARC dissidents arrested in Putumayo, Peru during Operation Armageddon a joint military effort by Colombia and Peru.

President Duque another Uribe protege, has remained a moderate critic of the peace treaty with FARC. He is uneasy about undoing the deal, considering that the civil war has led to the deaths of 220,000 people and the displacement of 7 million more.

The FARC deal has undergone some deterioration, since the peace agreement was signed. There has been an increasing number of former guerillas, that have created mafia type groups in various parts of the country.

There is also another insurgent group known as ELN which has been growing larger and ever stronger.

Duque has pledged to follow the policies set down by Uribe, in maintaining a militarized presence in dealing with these new insurgents.

Bricks of cocaine ready for sale

The final issue that has created constant vexation and international condemnation with succeeding Colombian governments, is the problem of narcotics trafficking.

Given the financial rewards for individuals involved in the drug trade, a solution will be incalculably difficult. It has been estimated for example, that coca production increased by 11% in 2017 compared to the prior year. Some have the figure as high as 17%, reaching a historic high of 1,400 metric tons.

To deal with this surge in output, President Duque has proposed reinstating aerial fumigation of the coca crops,a practice discontinued in 2015, over health concerns. He has also insisted on making illicit crop substitution mandatory, not voluntary.

The major trafficking routes in the drug trade

The record shows that most of these actions will lead to only short term gains, in the drug war. This is because, it merely leads to a dispersal of coca production. It does little to disincentive the growing of coca, due to the widespread poverty in the Colombian countryside.

Part of the problem, has always been that insurgent groups remained involved in the drug trade, as a method to fund their operations.

Another issue has been like elsewhere in the world, the drug trade ends up corrupting not only the judiciary, but the government itself. Many among the economic and political elite in Colombia either look the other way, or themselves participate in the production and movement of narcotics.

As the global economy slows,the Colombian government will no doubt attempt to maintain prosperity within the country, with an uptick in infrastructure spending and some social programs.

There is a limit to what can be done in this arena. The reason being a large increase in public spending increases federal deficits, which results in an overall increase in national debt. Public debt was as low as 34.9% in 2013. Last year, it had risen dramatically to 43%.

Rising debt often leads to a revaluation of a country’s credit rating. Colombia is no different and has been magnified by the ongoing volatility of oil prices, a source of income for the government.

He result was a Western credit rating agency downgrading it’s sovereign to BBB-, because of weaker economic growth and increasing external debt. This is not what foreign investors wish to hear.

Former President, Juan Santos

The national government is also dealing with local referendums that desire to reduce or stop some foreign investment. This has especially been the case, in the mining and oil sectors.

Colombia’s direct foreign investment (FDI), declined by 3% to $10.2 billion USD in the first 9 months of 2017 alone. This downward trend will need to be reversed in future years, if Colombia would like to resume faster economic expansion.

Economic growth, not wealth redistribution, offers Colombia the foremost opportunity to continue the enlargement of the middle class and to best help alleviate poverty, throughout the country. This can only be achieved by ongoing internal improvements of infrastructure and a constant inflow of foreign investment.

 

 

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