Colombia: World Bank, IMF Threw Economy Into Tailspin

WASHINGTON -- As the United States drifts deeper into the Colombian quagmire of drugs and war, policy-makers need to take a new look at the problems of poverty, joblessness and hopelessness that have made that country such a trouble spot.

And if they explore how unemployment in Colombia nearly doubled from 10.5 percent in 1990 to 19.7 percent in 2000, they will find a surprising pair of culprits -- not drug kingpins and leftist guerrillas, but the World Bank and the International Monetary Fund.

They sponsored draconian "economic reforms" that damaged the nation's industries and agriculture.

The policies promoted by these international lenders, including privatizing many industries and public services, eliminating subsidies of all kinds, raising interest rates and cutting public services, thrust the economy into a tailspin and wiped out tens of thousands of jobs.

A new report by the Medellin-based Global Policy Network (whose initials in Spanish are ENS) paints a grim picture of where Colombia stands and how it got there.

The devastating rise in unemployment has its roots in a series of economic reforms initiated in 1990, with World Bank and IMF guidance, to meet the demands of globalization.

In exchange for an IMF structural adjustment loan, Colombia agreed to privatize many industries and public services, eliminate subsidies, increase tariffs for public services, raise interest rates, downsize the public sector and open the nation's economy to world competition.

Some Colombian officials feared the effects of a rising tide of imports. But World Bank and IMF economists assured them that job gains in export industries would more than make up for the inevitable job losses in domestic industries.

As in other countries throughout the world, however, these assurances proved empty. Colombia now imports far more than it exports, and unemployment has soared.

Colombia's once-vital agricultural sector, which previously met the nation's needs and exported the surplus, has been devastated.

"The country has ceased to be self-sustaining, choosing to import what it once exported," the ENS report says. Colombia now imports more than 6 million tons of food annually while 2 million acres of arable land lie idle.

The industrial sector has suffered a similar fate as a massive influx of imports has swamped medium-size and small businesses.

This decline has, in turn, triggered a sharp reduction in the number of salaried workers -- from 37.1 percent of the population in 1992 to 30.7 percent in 2000.

Virtually the only part of the Colombian economy that has expanded is the least stable and productive for the economy as a whole.

This is the vast "informal" sector, which includes, at one end of the spectrum, legitimate but low-paying self-employment such as street vending and, at the other end, drug trafficking.

As a result of World Bank- and IMF-sponsored policies, per-capita income in Colombia has plunged from $2,716 in 1997 to $1,890 currently.

Between 1997 and 2000, the percentage of Colombians living in poverty rose from 50.3 percent to 60 percent.

"When people have a choice of seeing their family starve or breaking the law, laws against drug cultivation mean nothing and some people will take up arms," argues Jose Luciano Sanin of the ENS.

The United States should not be surprised by the increase in drug cultivation and trafficking. It is not a stretch to hold the World Bank, despite its programs to promote alternative crop production, and the IMF at least partially responsible.

Tony Avirgan is global policy coordinator for the Economic Policy Institute, a Washington-based economic think tank.

• 194 World Financial Institutions