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Colombia’s Neoliberal Madness
by Garry Leech
20 January 2003

Last week, the International Monetary Fund (IMF) agreed to provide Colombia with $2.1 billion over the next two years as long as the Uribe administration abides by the economic agenda put forth by the international lending institution. This agenda consists of privatizing one of the country’s largest banks, Bancafe. It also calls for the restructuring of Colombia’s pension program and the dismissal of tens of thousands of state workers in order to cut deficit spending. While announcing the new loan agreement, IMF officials made it clear that they do not expect Colombia to use any of the money, which the international lender classifies as a “stand-by loan.” In other words, Colombia has been approved for a $2.1 billion credit line—with $264 million available immediately—to which it can turn in case of an economic emergency. All of this begets the question: Why would Colombia agree to implement severe economic austerity measures that hurt the majority of Colombians in return for a loan it doesn’t really need? The answer lies in the complex military/economic relationship that exists between Washington and Bogotá.

In the late 1980s, drug traffickers—primarily the leaders of the Medellín cartel—launched an urban bombing campaign in an attempt to convince the Colombian government to end the practice of extraditing drug lords to the United States to stand trial. Bogotá turned to the administration of George Bush Sr. for military aid to combat the narco-traffickers. President Bush was more than happy to provide the necessary aid, albeit with certain strings attached. In return for Colombia’s share of the $2.2 billion Andean Initiative aid package, Bush called for economic reforms based on “market-driven policies.” Shortly after receiving the aid, the Gaviria administration initiated an “economic opening,” which implemented the neoliberal policies called for by Washington.

While Colombian officials like to hold the violence responsible for the country’s deteriorating economic performance over the past decade, the blame can be more accurately placed on the neoliberal policies introduced during the 1990s. After all, the intensity of Colombia’s conflict during the late 1940s and 1950s far exceeded that experienced during the 1990s, and yet the economy displayed impressive growth during that period. In fact, this economic growth continued until the 1990s, making Colombia one of the more economically stable countries in Latin America during the second half of the twentieth century.

But by 1999, Colombia’s economy had sunk into its worst recession in more than half a century. Even more worrying for Colombia’s political and economic elite was the growing military strength of the country’s leftist guerrilla groups. For the first time in more than 40 years of insurgency, Colombia’s rebels were capable of seriously threatening Colombia’s urban elite through kidnapping and bombings. And as it had done a decade earlier when confronted with the Medellín Cartel’s urban bombing campaign, Bogotá once again turned to Washington for increased military aid to combat the escalating insurgency. The Pastrana and Clinton administrations devised Plan Colombia, which called for massive amounts of foreign aid in order to boost Colombia’s economy, dramatically diminish drug trafficking, and end the civil conflict.

The economic component of Plan Colombia simply consisted of IMF-imposed austerity measures. And only one month after the Pastrana administration agreed to a three year, $2.7 billion loan from the IMF in December 1999, President Clinton proposed $1.6 billion in mostly military aid for Colombia—the $1.3 billion approved by Congress in July, 2000, made Colombia the third-largest recipient of U.S. military in the world behind only Israel and Egypt. As was the case ten years earlier, Bogotá adhered to economic policies that favored the economic interests of the United States and multinational corporations in return for increased military aid that served the interests of Washington and Colombia’s political and economic elite.

The terms of the 1999 IMF loan to Colombia were virtually identical to last week’s agreement. Colombia was forced to lower tariffs, privatize state-owned entities, and implement fiscal policies acceptable to the U.S.-dominated IMF. For the most part, despite resistance from unions, guerrillas and even Colombia’s Constitutional Court, Bogotá has satisfied Washington’s economic demands. And in return for implementing policies that have failed to alleviate the economic hard times being endured by the majority of Colombians, Bogotá did not receive a penny of the $2.7 billion IMF loan money. As is the case with the new loan agreement, the money simply served as an unused credit line.

Bogotá officials claim that the loan approval by the IMF will make it easier for Colombia to obtain some $8 billion in grants from other sources, including the World Bank and the Inter-American Development Bank. But these lending institutions have provided countries with funding in the past without demanding a de-facto credit rating approval by the IMF. Furthermore, unlike an individual’s credit rating, an IMF-determined credit rating is not based on a country’s past debt repayment performance, but on a nation’s willingness to subject itself to neoliberal austerity measures that favor the economic interests of the United States and multinational corporations.

It is tragic that a country is forced to relinquish its political and economic autonomy through demands that it implement policies that further impoverish its citizens in order to halt, albeit only temporarily, the country’s economic hemorrhaging. And to add insult to injury, these IMF-imposed policies virtually guarantee that the borrower will be forced to return for another handout in the near future. But what is even more tragic, and sublimely ridiculous, is that a country be forced to implement neoliberal austerity measures that place its economic well being in the hands of fickle, self-serving multinational corporations in return for no money whatsoever.

In essence, Washington has managed to have its cake and eat it too. President Uribe is desperately seeking increased U.S. military aid, which Washington is more than happy to provide, especially when that aid can be used as leverage for obtaining desired economic reforms. As was evidenced last week, IMF-imposed economic reforms once again coincided with a U.S. military escalation in Colombia. Under the terms of the new IMF loan agreement, the Uribe administration has agreed to implement new economic austerity measures. At the same time, Washington dispatched 70 U.S. Army Special Forces troops to Colombia under the guise of the war on terror. As a result, the United States has succeeded in dramatically escalating its military and economic role in Colombia at the behest of that country’s political and economic elite, which is desperately trying to preserve its own privileged status in the face of the growing insurgent threat.

This article originally appeared in Colombia Journal, an online journal that was published by the Information Network of the Americas (INOTA).

Garry Leech