Colombia - Economic development



In 1974, President Alfonso López outlined to Congress a long-range development plan with a major objective of achieving maximum growth while raising the living standards of the poorer half of the population. Efforts were to be concentrated in four main areas: exports, agriculture, regional development, and industry. An economic program published in 1980, during the administration of President Julio César Turbay, listed investment in energy, economic decentralization, regional autonomy, improvements in communications and transportation, mining development, and social improvement as its principal aims. A national development plan for the years 1981–84 provided for acceleration of public works. In 1982, during the Belisario Betancur presidency, economic emergencies were declared so that decrees to revise banking and fiscal policies could be issued without the need of congressional approval. The Virgilio Barco administration formulated an economic program similar to that proposed in 1974 by López, whose objectives were to attack unemployment and poverty while encouraging growth.

In 1990, President Cesar Gaviria instituted a national system of economic liberalization known as apertura, or opening. The system called for greatly increased international investment, a lowering of trade barriers, and massive state sell-offs. These began in earnest in the early 1990s as the government sold off seaports, airports, power plants, telecommunications networks, banks—even roads. In addition to these measures, the government aggressively pursued the creation of regional trading blocs and became a major voice in support of a hemispheric free trade area. Colombia became a member of Latin American Integration Association (LAIA), a bilateral free-trade pact with Chile and the G-3.

Liberalizations secured Colombia as a reliable regional market. The country saw positive growth every year for over two decades and was one of the only Latin American countries not to default on its international loans during the 1980s. Impeding further development are domestic political scandals, poor infrastructure, and narco-terrorism. In 1998, growth slowed, and even turned negative in 1999.

A $2.7 billion International Monetary Fund (IMF) loan in 1999 was needed in order to save the shrinking economy, which improved from the inflow and austerity measures during the next year. In 2000, the US government gave $1.3 billion in aid to Colombia's government and army, chiefly to help the war against drugs, but guerrilla armies continued to operate in at least twofifths of the country.

President Uribe, elected in 2002, pledged to restore order to the country and to increase security measures. He planned to raise defense spending from 3.5% of gross domestic product (GDP) to 5.8% by the end of his term in 2006, and the government in 2003 was training over 10,000 new police and16,000 part-time "peasant soldiers" to secure close to 200 towns previously lacking police. United States troops were also enlisted to guard Colombia's main oil pipeline. Uribe employed crop-dusting aircraft supplied by the United States, which in 2002 resulted in a 30% fall in coca cultivation. The government in 2003 also pledged to raise social spending, and depended on lending from international bodies such as the Inter-American Development Bank, World Bank, and Andean Development Corporation to augment the lack of sufficient revenue. In exchange for the assistance, the government was planning to implement structural reforms, such as pension and labor reforms to cut costs, and other spending cuts to reduce the deficit. In January 2003, Colombia negotiated a two-year, $2.1-billion Stand-By Arrangement with the IMF.

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