Welcoming business
A wagging finger and a sharp tongue
Monday, October 8, 2007
Álvaro Uribe Colombia’s president
Colombia’s president Álvaro Uribe has a lot of support and criticism as he faces huge challenges in his second term. Karina Robinson reports.
Colonel Aureliano Buendía, the main protagonist in Colombian author Gabriel García Márquez’s epic One Hundred Years of Solitude, is described as “lost in the solitude of his immense power”. He realises that he has won and lost the many wars of his lifetime for one reason only: “pure arrogance”.
That is my impression of president Álvaro Uribe, the man who has transformed Colombia, bringing greater security as well as one of the most welcoming business environments in Latin America.
As he shakes his index finger at me in admonition – a gesture so associated with him that it was used as the symbol of his re-election campaign – I comfort myself that I am in good company: all his ministers have been thus scolded in front of the Colombian people when attending his Communal Councils. Partly through these all-day, once-a-week meetings, which are broadcast live on national television, Mr Uribe has kept his popularity at rates of about 70%, an astonishing record for any politician in their fifth year of office.
This is even more of an accomplishment in Colombia, a country where the Latin American literary style term ‘magical realism’ (in which the fantastic is part of the everyday) as exemplified by Mr García Márquez, seems to apply on the ground.
Difficult job
“Colombia is one of the most difficult countries in the world to govern. Colombia is at times surrealist, very sui generis [unique],” says Carlos Moya, head of Banca de las Oportunidades, a government microcredit institute. “No president has come out from the job without turning grey.”
Fifty-five-year-old Mr Uribe certainly has turned grey. Despite squeezing daily yoga, exercise and meditation into his jam-packed agenda, his evident ageing since he took power in 2002 is shocking. His energy levels, however, are unchanged, say many of his much younger colleagues, who work with him from dawn to late at night and at weekends.
Mr Uribe needs all of that energy to deal with the challenges facing him in the first year of his second presidency. These include crucial relations with the US, which are at their most awkward on both the economic and political front; while domestically he faces a Supreme Court judgment that could derail the country’s peace process and a political scandal, as well as the challenges of an economic reform programme that critics allege has lost momentum.
US relations
Asked what is his plan B if a proposed free trade pact, the US-Colombia Trade Promotion Agreement, fails to make it through the US Congress this autumn, he says: “With the US I have no plan B. The logic is that it will be approved.”
Logic is not enough – even though Colombia is the one of the US’s most steadfast allies both regionally and globally, the agreement would bolster growth, help cut poverty and aid in undermining the powerful drugs industry and a couple of guerrilla movements. What matters now is US domestic politics.
The Democratic Party, in charge of Congress, has not taken kindly to Mr Uribe’s support for US president George W Bush in recent years. Added to that, Democratic Party candidates for the presidency are finding that protectionism plays well, while labour unions, to whom the party is traditionally close, have long argued that trade union leaders are being killed in Colombia. (The government notes that it is doing all it can by providing protection for them, while many fewer are being killed than a few years ago.)
Mr Uribe has tried flying in to Washington to lobby politicians such as Nancy Pelosi, a Democrat who is speaker (leader) of the House of Representatives. The chances are that Mr Uribe’s finger was wagging at that meeting. He is not known for being conciliatory, say those who work with him.
It is odd that he does not understand that behaviour that plays well in Colombia, where he was re-elected last year with 62% of the vote, will not play well with foreigners – especially considering he was exposed to the realities of politics as a child. His mother took him with her when she fought for women’s right to vote and campaigned to be a town councillor, says Any Vásquez, Colombia’s consul general in the UK and formerly a close associate of Mr Uribe’s from his days of politicking in the city of Medellín. According to Ms Vásquez, even as a schoolboy Mr Uribe would stand on his desk and give speeches, and his brother, when asked what he would be when he grew up, said “the brother of the president”.
Investor friendly
Even without the free trade pact with the US, foreign direct investment (FDI) has been rising steadily. Colombia benefits from duty free access to the US for 92% of its exports as a result of preferential access agreements. As Mr Uribe points out, FDI was only about $500m in 2002 when he took over the presidency. From $6.2bn in 2006, it looks set to reach $8bn this year.
Mr Uribe’s government has broadened the opening of the economy, which began in 1991. Colombia is rated above Chile, Mexico and Spain in terms of the consistency of the government’s policy direction, with a mark of 7.45 out of 10 in the authoritative 2006 IMD World Competitiveness Yearbook.
What looks out of place in this investor-friendly scenario is the imposition of capital controls, which the president had said he would not apply. He changed his mind on the back of a rising exchange rate, to an outcry from foreign fund managers and local investment bankers. “Our criticism is that it stopped money coming in but it had no effect on the revaluation,” says Andrés Restrepo, head of research at Corficolombiana, an investment bank. “The cost in terms of the stability of the rules of the game is big.”
Mr Uribe disagrees: “When I became president, this country had an investment rate of 12%; now it is 27%. We respect and create all the right conditions for investment and it has been coming to Colombia.”
He adds: “One has to establish the difference between foreign direct investment and speculative capital in a country that is seeing its exports affected by the revaluation. One cannot allow speculative capital to incur excesses that will cause harm.”
Sitting in a room at the Francisco de Paula Santander school, where the all-day Communal Council is about to take place (see article, page 140) , Mr Uribe enumerates the many measures the government has taken to favour investment, both local and foreign, within an economic model that “is not a statist model, which is differentiated from three parts of Latin America”. Presumably, he is referring to countries such as Venezuela (see article, page 144) and Argentina, among others.
He also notes that the most important factor is “the way the fiscal and financial health of the nation has been rising”.
>Economic progress
It is true that the economy has been growing steadily over the past few years, helped by the healthy progress of the international economy. This year, gross domestic product (GDP) growth is forecast to be about 6%, with a decrease in 2007 to more than 5% on the back of the rise in local interest rates (now set at 9.25% as the central bank combats inflation), a slowdown of the US economy (responsible for 40% of Colombia’s exports) and the rise in the Colombian peso, which is up 12% against the dollar in the year to date.
On the fiscal side, although great strides have been made since Mr Uribe took power, there is work to be done. To a suggestion that tax reform and a reform of transfer payments to the regions had been watered down in Congress because the president needed to pay back some political debts and that this government has less energy in tackling economic issues in its second term, he goes on the attack. His answers consist of snap queries (“Who says that?”), suggestions (“You have been badly informed”), sarcasm (“These wise men who spoke to you are criticising the reforms they were never able to do”) and unjust accusations (“It seems they were badly informed, they are hurting the country”).
These “wise men” whom the president believes are “wrong” consist of lawyers, economists and businessmen, including Luis Carlos Villegas, the president of ANDI (the National Association of Business). At a speech in Medellín a couple of days later, Mr Villegas called for faster and more all-encompassing action on privatisation to lower the deficit and thus ensure there was “no need to borrow in dollars, which is sending the peso up”.
He, and others who told The Banker that they voted for Mr Uribe , are upset that the government decided late in the day not to privatise electricity company ISA and postponed indefinitely the sale of sister company Isagén. As a result, economy minister Oscar Iván Zuluaga admitted in the local press that Colombia would need to access the capital markets for $2.3bn in financing in 2008, more than double the $1bn originally estimated on the back of those two large privatisations. Foreign debt payments are equivalent to 31% of the 2008 budget.
Mr Uribe points out, on the positive front, that the government has reformed 390 state companies while in power, that it is selling a stake in oil company Ecopetrol (ed: 2007) and that it is starting on the reform of clinics run by social security.
“Our government will do reforms in that direction until the last day of the government. But we do them in a democratic way and they have to be done through Congress,” he says, adding that this implies searching for options, persuading and listening.
“This is not a dictatorship, this is a democracy. You have to respect public opinion, you have to respect Congress,” he says.
Security situation
Supporters of Mr Uribe say he is showing the signs of strain due to the enormous pressure he is under this year. His astonishing feat – one that would not be out of place in a novel like One Hundred Years of Solitude – in bringing a large measure of security and peace to Colombia, is now taken for granted. Taking on the drug lords, the FARC and ELN guerrilla groups, plus the paramilitary groups (criminal gangs that originally arose to combat the guerrillas) is more than any of his predecessors managed.
The various threats have not gone away, but they have decreased substantially, in line with his electoral promise to bring security to the people of Colombia – what he calls “democratic security”. As well as official statistics, anecdotal evidence is available in the traffic jams leaving Bogotá on the weekends for the countryside. In 2002, Colombian roads outside the main cities were deemed too dangerous.
Even more impressive, the government is now present (if not entirely in control) in every one of Colombia’s 1099 far flung municipalities, notes Diego Molano, director of presidential programmes at Acción Social, an institution set up two years ago to integrate all government and international social programmes. In 2002, there were 300 municipalities with no mayors present and 200 with no police present, a few of which were controlled by the FARC or the paramilitaries.
The heavy military actions needed to ensure “democratic security” has lead non-governmental organisations such as Human Rights Watch to accuse the Colombian armed forces of abuses over the past years. Additionally, Amnesty International USA argued in a 2007 document that recent revelations that members of the government, including the security services, have links with paramilitary groups mean that the US Congress should “drastically alter its Colombia policy and redirect funding from predominantly security assistance to predominantly social aid and the protection of human rights defenders, indigenous peoples, Afro-Colombians, internally displaced persons, and communities defending their right to remain outside of Colombia’s armed conflict”.
Mr Uribe counters, instead, that the fact that the paramilitary ties have come to light and that those involved are now facing trial under the Colombian legal system is something that could only have happened in a democratic country with strong institutions. Critics allege, however, that Mr Uribe has weakened the country’s historically strong institutions; and constant attacks by the political opposition, which has even accused him of being a paramilitary, are evidently taking their toll on his temper and, more importantly, on the US’s aid programme. The $700m Plan Colombia is currently mired in the US Congress along with the free trade pact.
The war on drugs lords, guerrillas and paramilitaries is far from over, despite the demobilisation of 44,865 of them in the past five years and the imprisonment of others. Mr Uribe is currently dealing with a crucial Supreme Court judgment that changes the legal status of many of the demobilised and, effectively, could paralyse the hesitant peace process. Meanwhile, Colombia’s 2008 budget envisages funds allocated for defence and democratic security rising 27% compared with 2007.
Feeding the violence is not only the worldwide demand for drugs, but also poverty. Although the figure has fallen by 7% in the past five years, 45% of the population still live below the poverty line, according to government statistics. They include about two million people displaced from their homes by drugs and other related violence.
Mr Molano says that as the military recovers territory from the various illegal groups, “social recuperation” then takes place through his agency moving in and providing everything from primary education to drinking water.
No political peg
When asked how he defines himself, Mr Uribe, who has a reputation as a hard-liner of the right yet his government has also taken a number of social policy measures, relaxes for the first time in the interview. A smile of satisfaction appears, as do a number of electoral slogans – unavoidable for a born politician and the youngest mayor of his home town of Medellín at the age of 30 in 1982.
“When there is an operating democracy, the concepts of left or right are obsolete. Today we must speak of a profound democracy that should have five elements: security, respect for the freedoms, social cohesion, institutionalisation and transparency,” he says. “I will not define myself but I will tell you the three objectives of my government: consolidate security with a democratic reach, consolidate investor confidence with social responsibility, and fulfil our social policy goals.”
Other politicians, such as Sergio Fajardo, the charismatic current mayor of Medellín who has helped transform a city that in the early 1990s had the distinction of being the most violent in the world, doubts the social policies of the Uribe government are enough to bring about major change.
Mr Uribe has until 2010 in office. The question that international investors ask is whether he is irreplaceable. As he labours under the travails of a second term, the answer has to be that Colombia’s transformation is unstoppable, if obstacle-strewn, and capable politicians like Mr Fajardo would give the presidency a different air. Not least, by keeping any admonishing fingers under control.
