This month the Colombian stock exchange exceeded 5700 points. A historical record, yes, but also an unthinkable statistic representing an 8-fold increase over the past 6 years, a 6-fold increase in 5 years, and a 100% increase in just one year.
The stock market bonanza can be contrasted with the very moderate growth in the productive sectors of the economy. The GNP grew by just 3% in the last 12 months and 4% annually in the last 3 years. This means that despite stock prices that have grown faster than any in Latin America (or indeed the world) the growth of production is among the the worst in Latin America. Even though industrial growth reached 7% in 2003, in the first trimester of 2005 it reached the floor and fell through, below the previous year, with dramatic losses in March.
It?s clear that the surge at the exchange does not coincide with the productive reality and that besides on the terrain of production the economic cycle has begun is descent. What happened?
There are global and general phenomena. The global economic recovery coincided with the invasion of Iraq, low international interest rates, and the bonanza of the countries of the periphery due to the devaluation of the dollar and now the euro ? all of these have played a role in Colombia. They do not, however, explain the exceptional surge of stock prices, nor do they explain the prolonged and exaggerated increase over the past year. As in other dependent countries, in Colombia the sale of bonds has been a major source of the surge. The increase of public expenditure (which is against the government?s neoliberal doctrine) by 30% in the previous year has been vital. Military expenditures have been fundamental. State entities, programs, and institutions purchase bonds, and official budgets magically inflate.
The government?s purchase of its own bonds is as lucrative and sustainable as the pyramid schemes that have caused costly and disastrous illusions that resulted in terrible financial collapses, the most famous in Albania. Investments without real backing inflate the economy but then undermine it.
But even this factor does not provide a complete explanation. The sale of the ?Bavaria? brewery to SAB Miller is just one of numerous episodes of the boom, and not its cause. There are additional factors. First, the price of coffee finally has finally increased after years of decrease, and second, Colombia is a minor exporter of petroleum. But even this does not explain all. There is also the paramilitary factor. How? The commander of the fleet, Admiral Mauricio Soto denounced that the paramilitary AUC are liquidating their cocaine deposits, to launder these assets in the wake of the ?Justice and Peace? law that has just been approved by the Congress at the initiative of Uribe?s government. Unusual decommissions of several tons of cocaine are a sign of the enormous quantities of drugs that have left the country in recent months.
The economist Mauricio Cabrera has suggested that the increase in the reevaluation of the peso (a key factor in the stock exchange surge) is related to the recent guarantees of impunity to the paramilitaries and their narcotrafficking operations: ?The promises that were made during the negotiations, which culminated in the law of ?Peace and Justice? are the clearest explanation of why these ?investors? recovered their confidence in the country and decided to return their savings. In another epoch the ?extraditables? (NB: the ?extraditables? were a previous generation of narcotraffickers from the 1980s who protested extradition) said they preferred a tomb in Colombia to a prison in the US, today they prefer their large estates and their millions in Colombia, on a nice ranch in Ralito, to a prison in the United States, because they now have the guarantee of non-extradition, which they won by supporting President Uribe?s bid for re-election.?
This impunity has been guaranteed by way of subtle conceptual alterations to the Uribista laws that have been approved. On one side, the definition of vitims does not differentiate between the civilian population and combatants, treating massacres of civilians as the same as combats. On the other side, it classifies the crimes committed by the paramilitaries ?sedition?, which is itself a distortion, since sedition is a crime committed against the state and not against civilians. It is not the first time in this world that the concept of sedition has been misused this way: Chile?s penal code is similar, allowing ?sedition? against particular people. And whether it?s Uribe or Pinochet, ?sedition? against particular people is actually called ?dirty war?.
The victims in Colombia have been rural campesino, indigenous, and afro-colombian communities and worker?s unions. The material financers and beneficiaries have been large landowners and speculators who ended up with concentrated land holdings and new anti-labor legislation, privatized health care and services, and partial privatization of the state oil company. The impunity law only increases the penalties of those who, having committed attrocities or crimes against humanity, hide those who are behind those crimes, or when the ?seditious? person does not declare the full benefits of his crime. The minimal risk of punishment and the possibility of hiding the essentials has has the result of increasing ?investor confidence? in the country, seen in rising stock prices and public debt.
It can thus be understood why the ?Justice and Peace? law has had patent endorsements from the governments that pushed Plan Colombia, those countries with interests in transnational capital with its oil, health, and telecommunications industries. The US Ambassador endorsed the law. His only criticism was about another piece of legislation: the Free Trade Agreement, and he threatened Colombia with the ?worst of both worlds? if it refused to sign.
?God does not punish with the stick nor with the whip?, the popular refrain goes. Argentina has seen its impunity laws, which also contained letters-of-marque for european and north american transnationals. The cyclical economic crisis opened up a space for massive popular struggle, which gave fruit to the resilient struggle led for years by the Madres de la Plaza de Mayo. Pinochet and Montesinos have changed from heroes to villains. Fujimori and Videla are in disgrace, though they at least can say they stopped the guerrillas. Neither the paramilitaries nor Uribe can say the same for Colombia.
But for now the letter-of-marque, the dollars, the pounds, the euros, are enough to finance the campaign for Uribe?s re-election and the surge of the stock exchange until 2006. The fantasy is destined to evaporate into thin air.
Hector Mondragon is a Colombian activist and economist. Translation by Justin Podur.