Colombia - Politics, government, and taxation

Colombia was one of the first South American nations to gain independence from Spain in 1824. A part of the Gran Colombia (comprising also Venezuela, Ecuador, and Panama) until 1830, from the 1840s the country started on its own route, oriented toward a mild form of economic and social liberalism. From those early years onwards the country has been characterized by 3 major political features: first, a dominance of 2 major parties, the Liberals and Conservatives. From around the mid-19th century, traditional political parties have dominated the political scene, adapting to major social, economic, and international conditions. Second, the pervasive presence of political violence. The greatest bloodshed came in the War of the Thousand Days (1899-1902) in which 100,000 people died, and the "Violencia" (1948-66) during which between 100,000 and 200,000 lost their lives. Currently Colombia is plagued by violence from several leftist guerrilla groups and high levels of violence involving both street criminals and drug lords.

Paradoxically, the third feature has been a relatively long stability of democratically elected governments from 1910 onwards, with the exception of the period from 1949 to 1958. Apart from that brief period, Colombia's military forces have been known for their support of civilian-elected governments. In response to the mid-twentieth-century violence, the 2 traditional parties formed the National Front coalition under which Liberals and Conservatives alternated the presidency and shared power in Congress and the government bureaucracy from 1958 to 1974.

The political regime is presidential, with presidents elected directly every 4 years with no opportunity for reelection. The current president is Andrés Pastrana, elected in 1998. Every now and then there have been pressures toward more provincial autonomy, but the regime remained quite centralized from the enactment of the 1886 Constitution until a new one was drafted and approved in 1991. Regarding the judiciary system, the top of its hierarchy is selected by Congress. There is a bicameral (2-chamber) Congress; governors, mayors, and local councilors are also elected every 4 years, though on different dates. Although political confrontation has been bitter and even violent occasionally, the 2 parties have shared power most of the time, either through implicit agreements or under constitutional provisions, such as those forming the National Front.

The National Front era contributed to diminishing differences over policy, especially in economic matters, and served as a positive factor for stability and growth. At the same time, however, it was a means to exclude other players in the legal arena, which created incentives for armed struggle. During the National Front period— as well as other periods when compromise governments formed—it was virtually impossible to create a political organization outside the Liberal or Conservative parties.

For more than half a century Colombia has suffered from the action of left-wing guerrillas. From the late 1940s, growing discontent over poverty and social inequities in rural areas led to the formation of guerilla groups, which evolved into 2 major organizations, the Fuerzas Armadas Revolucionarias de Colombia (FARC, communist oriented), and the Ejercito de Liberacion Nacional (ELN, which supported Cuban leader Fidel Castro). During the 1970s and 1980s, the guerrillas turned their attention to the cities, and several attempts toward peace ended in bloodshed. Today the 2 former guerrilla groups have turned to the narcotics business in their search for financial support. In their pursuit of total power, the guerrillas have failed to topple the government but have caused major disruptions. That is also the case of the growing power of the drug cartels and paramilitary groups.

In 1991 a new constitution was drafted by a Constituent Assembly and later approved by a majority of Colombians. It cleared the way for new entrants to the political scene, instituted direct elections of provincial governors and mayors, and strengthened the office of the Attorney General, Constitutional Council, and the Electoral Authority. Other constitutional provisions regarding the political system, such as banning re-election and a 4-year presidential period, were maintained.

The strategy of the Pastrana administration has been to reinitiate peace negotiations with the 2 major groups (FARC and ELN) while at the same time obtaining important financial support from the U.S. government. This program—called Plan Colombia—is designed to combat the illegal drug plantations, laboratories, and the commercial drug network, thus depriving the guerrillas of financial support.

The size and influence of government over the economy has been rather mild. According to the World Bank, the central government revenues in 1998 were only 12 percent of GDP. Though the level of state involvement increased from the 1940s to the 1970s, Colombia never concentrated major portions of wealth creation in the hands of the state. Coffee production, with its wide participation of private growers and commercial retail networks, has been an important factor both in terms of tax collection and the presence of private capital.

For many years financial policy was shared between the executive branch and congress, with participation of the private sector , but from the mid-1960s, most of the responsibility has rested with the former, with monetary policy in the hands of the Banco de la Republica (central bank). Traditionally, the government has regulated the prices of electricity, water, sewage, telephone services, public transportation, rents, education tuition, and pharmaceuticals. During the 1960s the government also established a set of public financing institutions and in the 1980s, amid a financial crisis, it nationalized a number of private banks.

In general terms, Liberals and Conservatives have agreed on major policy issues like monetary stability, the avoidance of high inflation , export promotion, and the cautious development of oil. During the 1980s and 1990s, most differences between the parties were over the pace of economic reforms. The Liberal party advocates milder and slower reforms while Conservatives tend to support more open market policies. In 1990, the administration of President Cesar Gaviria (1990-94) initiated economic liberalization, or apertura, and it has continued since then, though at a slower pace. It consists of tariff reductions, financial deregulation , privatization of state-owned enterprises, and the adoption of a more flexible foreign exchange system. After a period of lack of interest in liberalization during the Samper administration (1994-98), the Pastrana administration has regained the pace of economic reforms.

According to the World Development Indicators 1999 more than one-quarter of Colombia's current revenues come from indirect taxes , primarily from domestic taxes on goods and services, and another quarter from direct taxes on income, profit, and capital gains. An unfavorable aspect of the tax situation in Colombia has been a recurrent tendency of several administrations to pardon unpaid taxes accumulated by firms and individuals over the years.