COLOMBIA: Santos Inherits Country of Economic Contrasts

By Constanza Vieira and Helda Martínez Reprint | | Print |

Constanza Vieira and Helda Martínez

BOGOTÁ, Aug 9 2010 (IPS) - During the eight years that Álvaro Uribe governed Colombia, annual economic growth averaged 4.3 percent. Nevertheless, President Juan Manuel Santos, who was sworn in on Saturday, has taken over a country with the highest unemployment rate in Latin America.

Street hawkers in Bolívar plaza in Bogotá. In the background, the capitol, where President Santos was sworn in Saturday. Credit: Helda Martínez/IPS

“Economic growth in the Uribe era was far higher than the 1994-2001 average of 2.1 percent” and was quite stable compared to the rest of the countries of Latin America, said outgoing finance minister Oscar Zuluaga.

But that did not prevent this country from holding the region’s record in unemployment: 12 percent in July (after hitting 14 percent in January 2009, the highest level during the Uribe administration), according to official figures.

Unemployment soared despite the fact that “the minimum salary set for workers was increased just 16 percent during the two four-year terms,” economist Juan Pablo Fernández, a congressional adviser for the leftwing Alternative Democratic Pole, told IPS.

“It was employers, who gained an additional eight percent in profits per worker, that benefited from the tiny increase in the minimum wage,” he said.

And the rates for poverty and extreme poverty remain high, at 46 and 17 percent respectively — a far cry from Uribe’s pledge to bring poverty down to 35 percent this year, as part of Colombia’s efforts to meet the Millennium Development Goals (a set of anti-poverty and development targets adopted by the international community in 2000).

The contrast was especially marked between 2005 and 2007, when the extreme poverty rate expanded 2.1 percent, despite 5.6 percent economic growth.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), Colombia is now the most unequal country in Latin America, based on the Gini inequality index, which measures the degree of income disparity.

The Gini coefficient — where 0 represents perfect equality and 1 perfect inequality — is now 0.85 in Colombia, compared to 0.55 in 2002, indicating a growing concentration of wealth, ECLAC reported.

“The economic policies of the outgoing government basically favoured foreign capital, turning Colombia into a tax haven,” Fernández said.

The Finance Ministry reported that gross foreign investment represented 3.1 percent of GDP in 2009, up from two percent in 2002. “In monetary terms, that means it climbed from 2.1 billion dollars to 7.2 billion dollars in eight years,” Zuluaga said.

But Colombia has the most volatile exchange rate in the region, “which benefits the foreign market and keeps the country’s exporters of cut flowers, coffee, bananas, textiles and garments in a state of complete uncertainty,” Fernández said.

The Uribe administration’s policies favoured foreign capital to the detriment of national production, and as a result, “10 million tons of food are imported annually, in sharp contrast with the country’s identity as a major agricultural producer,” he said.

The economic model followed by Uribe led to a boom in maquilas — export assembly factories in tax-free zones — that use “very cheap labour,” the economist said.