No drugs, no downturn

It’s recession time in Colombia, after a decade in which the liberalisation of the economy inspired an unprecedented wave of unconstrained consumption.

But Colombians have borrowed far more than they could ever repay, and the banks that fuelled the boom through their excessive lending have found themselves hideously exposed as the market collapses.

And if the economic bloodletting wasn’t enough, then take a look at the streets, where the real stuff stains the cracked pavements of the country’s favelas. Drug-fuelled violence has cost over 20,000 lives since January; entire swathes of Bogota and Medellin are under siege by weapon-wielding gangsters battling for control of the country’s $3bn-a-year cocaine industry. Dozens of kidnappings occur every day, and it’s not often that the victims return in one piece.

The year is 1999, and Colombia is in the midst of its own great recession, set against the backdrop of cartel-driven violence for which the country has become infamous.

Arrive in Colombia today, however, and the South American country has changed beyond recognition in the intervening decade. Stung by the severity of the 1999 economic collapse, the country enacted a series of regulations to ensure that Colombia’s traumatised financial institutions would not be able to make the same mistakes again, nor its citizens borrow beyond their means.

In 2009, years of conservative fiscal policy have ensured that Colombia has largely escaped the financial woes suffered by the US and Europe in the wake of the subprime crisis and credit crunch.

The holding company of its biggest bank, Bancolombia, was forced to write off just $5m in bad loans, from a portfolio worth some $60bn. The money was in the form of a note to Lehman Brothers, the collapse of which signaled the beginning of the end for some global financial institutions, yet barely caused a ripple here.

Of course, Colombia has not proven totally immune to the slings and arrows of the global economic downturn. Its biggest export market is the US, and a combination of the weakened dollar and reduced consumption in the world’s biggest economy, has meant that the shipments of millions of tonnes of coffee, textiles, bananas, coal, and emeralds have slowed to a crawl.

Nevertheless the mood in the major cities of Bogota, Medellin and Cartegena is one of unbridled optimism. Economic growth is expected to decelerate to around 0.5 pecent this year, but bear in mind that Colombia’s GDP has grown by an average of 4.35 percent per year over the last six decades, with only one year of negative growth – 1999.

While the majority of its South American neighbours struggle to keep their heads above water, Colombia has joined Brazil as one of the shining lights of the region’s fast-developing economies.

It has also become a poster boy in the fight against violent crime. The hardline tactics of immensely popular president Alvaro Uribe have reclaimed streets that were once amongst the most dangerous in the world.

While poverty is still a problem, the dirt-poor barrios of its major cities have been transformed from ultraviolent ghettos to unlikely centres of culture and learning. In Medellin, the sprawling city made infamous in the 80s and 90s by Pablo Escobar and his cocaine kings, public libraries and parks illuminate the darkest of streets in the poorest of neighbourhoods.

In November, Colombia will open its first Gulf embassy in Abu Dhabi, elevating political and trade ties between the two countries. It is a move that is expected to prompt a storm of investment activity, as Gulf firms vie for a stake in one of the world’s most consistently rewarding emerging markets.

Meanwhile, a recent poll of the Colombian private sector revealed that 60 percent of firms were looking to expand into new markets, including the GCC.

UAE-based Mubadala has already entered into a series of discussions over investing in Colombia, while the Abu Dhabi Investment Authority has stakes in Ecopetrol and Grupo Suramerica, two of Colombia’s biggest firms, through portfolio investments. Either way the money flows, it promises to be another revelatory decade for Colombia – as well as its partners in the Gulf.

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READERS' COMMENTS

I saw it grow
Posted by Alex on Tuesday 6 October 2009 at 19:16 UAE time


While the improvement in the economy has not trickled down to everyone yet, the vast improvements in the economy and especially security are obvious over the past 8 years. I personally love the country for it's natural beauty, the culture, the music and the warm friendly people. Oh..and the FOOD!!!

Colombia
Posted by Patrick on Tuesday 6 October 2009 at 11:21 UAE time


Having been to Colombia many times in the past 10 years and having married a lovely lady from that place, I can say that it's an exciting and wonderful country. The security situation has been transformed. Unfortunately generally the press and Hollywood still seem to think it's a war zone. Nothing could be further from the truth! With exports such as coffee, flowers, coal, iron, an with the potential of large oil/gas deposits the country has a bright future. But perhaps its biggest asset will be its beauty, not only the country but its people as well.. I predict that tourism will be huge in the future. So don't believe everything you hear in the press.

Check out this video on youtube. It says it all

http://www.youtube.com/watch?v=qgW8Y7F8DN8

Good for Colombia
Posted by Mick, Dubai, UAE on Tuesday 6 October 2009 at 11:03 UAE time


Being the stepson of a proud Colombiana.....I am very happy that a, once villified, country is now being shown as a true icon of turnaround amidst unspeakable odds of the past.
Uribe has done amazing work and the people of Colombia are such passionate people for their country and justifiably proud.
Greatest country in S.A. and a monument to hope and hard work.

colombia
Posted by ana karin miranda, cartagena, colombia on Tuesday 6 October 2009 at 01:42 UAE time


is a good description of what is currently living in Colombia, but good Colombians are optimistic and always know that things can and will be better.

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