As the US presidential campaign is slowly turning into a self-parody of debates focusing on glass and ceilings, pits and bulls or lips and sticks, all too often do we get distracted by the fact that regardless of whether the next inhabitant of the White House will be more or less church-going, more or less gun-totting, and more or less procreating, this nation will also have to elect part of its legislative.
And the Congress has a long shelf of unfinished businesses. Among the homework postponed until after the skiing season, US Congressmen and Congresswomen have been extraordinarily successful dithering over the ratification of Free Trade Agreement (FTA) with Colombia. Protectionism is economically questionable. But when applied to allied nations in the immediate neighborhood, it is a folly.
AN EMBARASSING CASE OF REGIONAL MYOPIA
Colombia is a large open economy. 22% of its GDP is generated by exports. 40% of exports and 32% of imports are exchanged in trade with the United States, with some 51% of the total covered by the Andean Trade Preference and Drug Eradication Act (ATPDEA), a temporary free trade arrangement, introduced in August 2002. Under ATPDEA, over 1’200 products entered the US market duty free, creating 90’000 new jobs in Colombia. Colombia is also among the main importers of US agricultural products.
Colombia has created a successful coffee brand and privatized its coal industry but an unprecedented economic contraction gripped the country early this decade. It only began to recover slowly around 2003, following a competitive depreciation of the currency, good performance of non-traditional exports (textiles, clothing, flowers) and the revival of the construction industry. President Alvaro Uribe hopes that enhanced access to US markets will attract foreign direct investment in labor-intensive industries.
All trade agreements are viewed in terms of domestic political costs, weighed against the benefits preached by economic orthodoxy. And it is the potential for job creation in Colombia that is at the core of the lengthy ratification process in the US. The costs of FTA’s failure seem to be seriously underestimated.
THE PROMISES OF THE LAND
In Colombia, a measure of resigned defeatism always elicits a chuckle. I often heard the locals joke about thir favorite sports – the so-called Colombian triathlon – “aguardiente, rumba y muchacha” (alcohol, dance and girls). But such fatalistic outlook on life is responsible for the lackadaisical attitude not only towards rural poverty and addictions but also AIDS, with little in the way of visible prevention campaigns in the countryside.
The country’s commendable macroeconomic performance has long been contrasted with the entrenched poverty and the social woes, deeply rooted in Colombia’s economic history. The reasons for the recurrent violence in the countryside should be sought in the spontaneous, sometimes chaotic colonization of the new lands. As a Spanish colony, Colombia quickly ran out of precious metals and shifted to agricultural commodities. Sugar and tobacco plantations benefited from costless African and Zambo slave labor. Contraband soon developed to facilitate direct trade between neighboring colonies (intercolony trade was forbidden by the Spanish Crown). And although Criollo-run councils were at the forefront of Colombia’s growing national self-determination, vested interests of the landholding class led to lopsided asset distribution - 2% of the population owning 70% of the land. Poverty and violence in overpopulated centers further pushed colons to the periphery, where they were attracted by the illusion of prosperity. The resulting debt trap further solidified the skewed ownership structure.
The modern structure of land ownership in Colombia is a tangible proof of the uneven land distribution that durably underpinned the convexity of the Lorenz curve. Beyond the land used for successful, modern agricultural production, much of Colombia is divided between traditional latifundia with big haciendas (often a playground of right-wing paramilitaries), areas of historical colonization (the original hotbed of left-wing guerrilleros), regions colonized since the 1970s (later turned into a frequent battleground between the paramilitaries and the guerrillas) and “minifundios” – poor peasant parcels, plagued by a variety of potential claims and counter-claims. In addition, there are indigenous “minifundios” whose landowners are easily manipulated by various political forces in Bogota. Finally, poor outer barrios are predominantly composed of squatters displaced by the civil war.
Much of the original, post-colonial ownership structure persisted largely intact into the 1970’s. By that time, radicalization of peasant movements led to the emergence of massive rural guerrilla activity, fuelled by extensive underground economy.
THE SOCIAL ECONOMY OF COCAINE SECTOR
For many years, the economy of (urban) Colombian was one of the strongest performers in Latin America, somehow seemed insulated from the surrounding atmosphere of violence, crime and corruption. Rapid economic growth lasted for most of the second half of the 20th century. During Latin America’s debt crisis the 1980s, Colombia was the only country that avoided defaulting on its external debt commitments, and recorded average growth rates of 3.5%, despite having to adjust to swings in the prices of its main commodity exports. However, early this century, the recession reversed that situation with both investor and consumer confidence suffering from the effects of continuing disruption and uncertainty. In 1998, the tight monetary policy designed to maintain the peso peg weakened the economy and exposed it to falling commodity prices. Public deficit reached 6%, financed mostly by the sale of treasuries in the international markets.
Between 1980 and 1997, Colombia’s parallel economy spawned vertically integrated international enterprises specializing in planting, harvesting, processing, trading and marketing illicit drugs, predominantly cocaine, where Colombia accounted for 60% of the world’s cultivation. The trade generated revenue equivalent to 7% of the country’s GDP. Coca was cultivated in areas in the south-eastern part of the country, but also smuggled in from Peru and Bolivia for industrial processing. By the end of the 20th century, Colombia supplied 75% of the world’s cocaine and successfully competed for heroin markets with Burmese and Afghan exports. Its main export target was the US where Colombian exports enjoyed the market share of 90% for cocaine and 65% for heroin products.
Narco-terrorists assassinated three presidential candidates in 1980’s. The death of Pablo Escobar in December 1993 put an end to Medellin Cartel’s dominance. In place, Cali Cartel rose to prominence, bringing down President Samper, accused of receiving electoral funds from the narco-barons. In 1994, Colombia ratified the 1988 UN convention on narcotics, but it was the last Andean country to do so. Between 1993 and 1997 lenient sentences were offered to narco-criminals in exchange for cooperation. However, in response to verbal and economic pressure from Washington, tougher line has been followed since 1997.
The breaking of the Cali cartel in 1997, responsible for the supply of 80% of cocaine to the US, drove industrial production into the hands of smaller operators, often collaborating with the communist insurgents and the paramilitaries. Although ideologically supported by naïve, left-wing NGOs in Western Europe, the guerrillas have, for a number of years, been providing drug cartels with crop protection, production laboratories and airstrips, while some members of the guerrilla groups were believed to be more directly involved in drug-trafficking. Not surprisingly, many paramilitary groups also sought access to the lucrative business, some with considerable success.
In 1999, the government estimated that some $5bn was smuggled into the country for money-laundering operations. By then, the main coca-growing areas were concentrated in the South-West region of Putamayo. The products were exported either through Brazil or over the inhospitable northern corridor between the Caribbean and the Pacific Ocean. It is in this area that large-scale battles opposed the communist guerrillas and right-wing paramilitaries, each vying for the control of this vital region. However, according to a UN study, the coca crop fell 30% in 2002 and another 21% in 2003, pushing the primary crop production across the border to Peru. High-earning crop substitution programs were lacking, making these gains unsustainable.
As recently as 2003, an estimated 35000 people were involved in various armed groupings. If the horizontal social mobility was statistically high in Colombia, then it owed it less to existing attractive opportunities in the urban centers and more to push factors – a spiral of violence and fear. The armed conflict displaced some 2m people, most of whom congregated in outer barrios. The process of demobilization posed a dilemma of durable employment for the former combatants. To this day job creation is the single most acute social issue for the country facing 60% poverty rate and 16% unemployment, an easy prey to the self-regenerating hydra of drug industry and parasitic criminal middlemen.
This is not an issue that the US Congress can easily turn its back on. But it did, again, last spring. The ratification procedure of the trade agreement originally signed in 2006 was delayed on allegedly procedural grounds, as a way to avoid the first defeat of an FTA since fast-track rules had been established three decades earlier. House Democrats’ opposition was misguided. Hiding protectionist agendas beyond the veil of concern for human rights betrays either poor understanding of socio-economic conditions in Colombia, or simply reveals pre-electoral hypocrisy. But relations between Washington and Bogota should be viewed in a broader, strategic sense. Especially now when a deranged caudillo in a neighboring country yelps from the podium: “qué se vayan al diablo, los Yanquis de mierda!”
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