Colombia and the IMF: Policies that Worsen Problems

January 2002 by Globalize this


Colombia’s relationship with the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
is similar to the relationship between a poor, sick patient and a costly doctor. The patient, badly in need of help, goes to the doctor for treatment. The doctor in return prescribes the patient a very expensive, controversial medication. The patient agrees, knowing that they cannot afford it, but, feeling desperate, consents to the treatment. Eventually, the patient develops terrible side effects to the treatment, and also discovers that the original problem has worsened. The patient-poorer, sicker and more desperate-needs more “medicine” than ever before.

Two years of financial “infusions” from the IMF are affecting Colombia in the same way. The South American country’s experience with IMF policies illustrates how the Fund caters to the interests of international investors and the Colombian elite, while harming the well being of ordinary Colombians in the process.

Ignoring massive public protests against the IMF-mandated reforms, the lending institution’s policies have systematically cut health care, education and other social services for millions of Colombians, laying off tens of thousands of workers in the process.

The IMF’s relationship with Colombia has deepened poverty and inequality there, while claiming to do the opposite-all in the name of “free” trade, market liberalization and financial stability.

Equally as damaging to Colombian society is the way that the government has imposed the IMF-mandated economic strategy. Characterized by undemocratic and authoritarian practices, the government silences grassroots opposition, undermining the legitimacy of Colombian democracy.

The 1990s-from Optimism to Emigration

Colombia in the early 1990s was a land of renewed optimism and hope. The 1980s-referred to by many as a “lost decade” in Latin America because of region-wide economic woes-passed with Colombia riding relatively high on one of the hemisphere’s most stable and strong economies. A new constitution had been written that included more of Colombian society than ever before. Some of the nation’s guerilla groups, weary of war, decided to involve themselves in the political process, forming political parties. Social peace, for so long an abstract, seemed tangible.

Considering this, perhaps not even the most hopeless of pessimists could have imagined the nightmare that Colombians have lived through during the last decade. The economy has fallen into its worst recession of the century, with official unemployment hovering around 20 percent. The country’s bloody civil war claimed more than 100,000 lives. As a result, Colombians began to lose the hope that had buoyed them through the early 1990s. Between 1996 and 2000, 1,072,000 Colombians, sensing the worst was yet to come, left their homeland behind.

Colombian Neoliberalism-A Future for Whom?

Not coincidentally, it was in the late 1980s and early 1990s that Colombia began to experiment with neoliberal economic policies. Beginning with President Barcos (1986-1990), and continuing during the administrations of Gaviria (1990-1994), Samper (1994-1998) and Pastrana (1988-present), the Colombian elite wholeheartedly imposed the neoliberal economic model.

Gaviria, who 25 percent of Colombians blamed for the economic depression in a recent poll, proudly proclaimed to his countrymen in 1991, “Welcome to the future,” referring to the new constitution and the neoliberal economic opening. Ten years later, during a recent development forum, the same man who boasted with such optimistic pride quizically answered questions regarding Colombia’ s economic downturn. “I have to confess that the evolution of the country after my government has left me perplexed, like many other Colombians.”

Yet, while Gaviria scratches his head trying to figure out what happened, most Colombians-those who cannot afford the same luxury of economic theorizing-are jobless and hungry.

The debate surrounding who and what is to blame for Colombia’s economic downturn points to various causes. Some blame the constitution of 1991, whose new laws turned out to be costly to create and enforce. Some say neoliberalism and the uncontrolled opening-up of the Colombian economy to foreign investment are at fault. The other usual suspects are the reevaluation of the Colombian peso, and bad management of public spending by the state, among others.

Whatever the reasons, Colombia’s economy slid into dire straits. And the Colombian elite, needing a bailout, went knocking on the IMF’s door, hat in hand.

Plan Colombia and the IMF

After the scandal-ridden Samper presidency, Andrés Pastrana Arango was elected in 1998 with a mandate of peace. Recognizing the nation’s increasingly desperate social, economic and political situation, the Pastrana administration developed Plan Colombia. The Colombian and US governments ostensibly describe Plan Colombia as a $7.5 billion integrated strategy to meet the most pressing challenges confronting Colombia today-promoting the peace process, combating the narcotics industry, reviving the Colombian economy, and strengthening the democratic pillars of Colombian society.

Falsely billing its support of Plan Colombia as part of the “War on Drugs,” the US government has thrown its weight behind the plan with billions of dollars of mostly-military aid, lying to US citizens in the process. The US emphatically characterizes the aid as counternarcotic, instead of counterinsurgent-a semantic tongue twister that Colombians know to be untrue.

Although not directly related to Plan Colombia, the IMF’s Colombia loan fits in to Plan Colombia as part of the larger strategy to revive the Colombian economy.

In 1999, Colombia appealed to the IMF for a loan for the first time in its history. The Fund obliged with a three-year credit worth $2.7 billion and its customary mandate-a structural reform agenda of austere fiscal policies that includes measures to streamline the revenue sharing system, reform the public pension systems, and downsize the public sector.

Failing to implement an economic alternative that protects ordinary Colombians, the Colombian state tightened its fiscal belt by cutting public spending-a move that hit the poorer segments of society the hardest. In the words of one Colombian economist, “What’s the alternative? Increase the taxes on your elite? Do it if you can.”

Most damaging to the average Colombian are the severe cutbacks in public investment in basic social services-health care, education and social security. It is a painful practice that one Colombian congressperson likened to “conducting a complex surgery without the use of anesthesia.”

Colombian Grassroots Opposition to IMF Economic Reforms

To implement the IMF’s demands, the Colombian government needed to pass special legislation, including changes to the constitution.

Many Colombians, not keen on the idea of having their well being on the fiscal operating table, have organized in nationwide protests against the various legislative changes.

In March 2001, hundreds of thousands of Colombian state workers went on a 24-hour strike to demonstrate against economic policies that resulted in mass layoffs and reduced social benefits. The layoffs are expected to total around 100,000 government employees.

Starting May 15, 2001, more than125,000 heath care workers and 300,000 public school teachers went on a month-long nationwide strike to protest against the ley de transferencias, or transfers law, a bill that would cap the federal money to departments [states] and municipalities for education, healthcare and other social needs.

Critics of the law warned that its implementation would result in the loss of 1,416,000 places for students in the public school system, adding to the estimated 3 million Colombian youths that are already outside the system. They also claimed that some 2.5 million more Colombians would be excluded from public health care.

Upon the bill’s passage on June 20, 2001, Colombia’s largest teachers’ and health care workers’ unions, FECODE and ANTHOC, publicly declared, “Since the time of Pastrana’s development plan, no other initiative has created such a movement of opposition. But, it appears that the requirements of the IMF and financial capital supersede the interests of the nation and of the Colombian people.”

Next up for surgery is the pension system. The controversial reform is another Colombian commitment to the IMF and is expected to galvanize the Colombian public in even more anti-Fund protests.

The Authoritarianism of the Colombian State

As the Colombian state adopts neoliberal economic strategy, it has become more authoritarian. Increasingly gaining more power to fight the US-sponsored “drug war” and the 40-year-old guerrilla insurgency, the government has used those powers to continually repress democratic liberties.

Laws like the recently passed ley de guerra , or war law, have granted the Colombian military more room to unilaterally crack down on “guerilla terrorism.” Colombian and international NGOs, basing their concerns on past experiences, worry that such increased military powers will also be used to silence any voices of dissent that challenge the will of the Colombian government.

By heavily relying upon the force of its US-sponsored military, Colombia risks exacerbating the level of violence and state authoritarianism. This is a misguided approach that is likely to repress the sectors of the population that that are suffering the most from Colombia’s neoliberal economic policies.

By silencing dissent like the IMF protests, and closing in on the political space that civilians are allowed to participate in, another result of Colombia’s authoritarianism may be to further undermine the democratic process, and worsen Colombia’s social, economic and political woes.




CADTM

COMMITTEE FOR THE ABOLITION OF ILLEGITIMATE DEBT

35 rue Fabry
4000 - Liège- Belgique

00324 226 62 85
info@cadtm.org

cadtm.org