Colombia's Uribe, the Un-Chavez, Battles Violence, Not Big Oil

26.05.06

Bloomberg.com

Rooftop marksmen and bodyguards with bullet-proof shields scan the crowd as President Alvaro Uribe makes his way to a campaign podium in the town square of Armenia, in Colombia’s western coffee-growing region.

A hoarse Uribe, 53, wearing an open-neck shirt and blue blazer, shouts over the clatter of police helicopters: ``Without security there’s no employment! Without security there’s no investment! Without security there’s no economic growth!’’

Missing is any indictment of multinational oil companies, a tack that has lured other South American voters to leaders such as Venezuelan President Hugo Chavez. Uribe’s crime-fighting message is thriving in Colombia, where opinion polls show him heading for a second term in the May 28 presidential election.

Since his 2002 election, the former lawyer has warmed to the U.S. and attracted foreign investment. He has also boosted troop levels deployed against guerrillas while offering incentives to rebels to end fighting. Violent crime has dropped.

``We are poor, but I would rather have more safety under Uribe than more money and fear under someone else,’’ says Elvira Pineda, a mother of three who sells grilled corn on the dirt streets of Ciudad Bolivar, a hillside shantytown on the southern outskirts of Bogota.

Pineda, 43, recalls how gunshots used to wake her almost every night. ``I would worry about my family constantly,’’ she says. ``We lived in fear.’’

Uribe is likely to win 54.7 percent of the votes on May 28, according to a poll of 1,200 people from May 10 to May 17 by Bogota-based Datexco. The margin of error was 2.8 percentage points.

Finish the Job

Carlos Gaviria, 69, an anti-free-trade candidate of the Polo Democratic Party, trails with 23.7 percent, and Horacio Serpa, 63, of the Populist Liberal Party, has about 10 percent, the poll shows.

Uribe is running for another four years in office as an independent after persuading Congress to change the constitution to allow him to serve a second term, saying he needed more time to complete his war on violence. A Gallup Colombia poll published last week in La Republica gave him 61.2 percent, Gaviria 20.4 percent and Serpa 13.7 percent.

For most voters, combating a drug-financed guerrilla war is the government’s first priority, says Peter Hakim, president of the Inter-American Dialogue, a Washington-based research group.

``Uribe is on the conservative side of South American politics, but Colombia, which has had a history of being the most politically violent country in South America, wants that,’’ says Hakim. ``It’s a rejection of violence, and that takes precedence over an end to inequality.’’

Rich and Poor

After Bolivia, Colombia has the widest gap between rich and poor in South America, according to the World Bank. About 49 percent of Colombia’s 41 million people live in poverty, and about 15 percent live on less than $2.50 a day, government figures show. Unemployment in Colombia’s 13 biggest cities declined to 12.2 percent from 18 percent when Uribe took office.

``Colombia still has huge social needs to tackle,’’ said Richard Francis, a sovereign-debt analyst at Standard & Poor’s. ``The poverty rate is extremely high, unemployment is too high and there are too many displaced by the war. Still, Uribe’s legacy will come with security.’’

Gaviria’s platform includes a referendum on free trade and more funds for social programs. He has the support of voters such as Carolina Torres, 24, who is wary of Uribe’s course.

``He has played his legacy of security to full affect but has done so little to ease the plight of the poor,’’ says Torres, who works as a stage actress in Bogota. ``Free trade with the U.S. is just going to make things worse for the millions of poor farmers in Colombia.’’

U.S. Funding

Uribe, a former provincial governor, says that poverty in his country can only be resolved by a continuation of the economic growth that has resulted from improved security.

In his anti-crime battle, Uribe has targeted the Marxist- inspired Revolutionary Armed Forces of Colombia, known as the FARC. Uribe’s father died in a botched kidnap attempt by the FARC 22 years ago. The guerrilla group is the source of more than half the cocaine sold on the streets of the U.S. and Europe, according to the U.S. Justice Department.

In the past six years, the U.S. has given Colombia more than $4 billion to fight drug production and trafficking. Uribe set up a network of informants and dedicated extra money and troops to urban, jungle and mountain regions, helping slash kidnappings by 72 percent and cut the murder rate by 37 percent, according to the National Planning Department. Married with two grown sons, Uribe has survived at least 18 assassination attempts.

Force, Negotiation

In the last 12 months, Uribe has also persuaded most of the country’s 30,000 paramilitary fighters, who formed illegal groups to combat the FARC, to lay down their arms in return for reduced prison sentences and job training. He has offered the same terms to members of the FARC and the National Liberation Army, another rebel group.

Uribe, who has pledged to end guerrilla violence by force or negotiation, said last week that he would consider removing troops from a larger area than originally proposed by European diplomats, should the rebels agree to exchange hundreds of hostages and end hostilities. The guerrillas have said repeatedly that they will not negotiate with Uribe.

Backing in Congress

Voters already have shown indirect support for Uribe’s policies. Elections in March gave him the backing of a majority in both houses of Congress. That opens an opportunity for him to pass his planned legislation on a free-trade accord with the U.S. and to overhaul the tax code to increase the number of goods subject to the value-added tax, among other tax changes.

The decline in violence has attracted investors and spurred consumer spending. Colombia’s $117 billion economy, which is based on the export of oil, coal and coffee, has expanded an average 4.6 percent a year since Uribe took office. Foreign direct investment rose to $10 billion in 2005 from $2 billion in 2002.

The global slide in emerging-market stocks this month reverberated in Colombia, where the benchmark IGBC stock market index fell 26 percent during May.

``Colombia’s market was affected perhaps more than other emerging markets because of the thousands of small, inexperienced investors we have here,’’ says Edgar Jimenez, an analyst at Bogota-based Promotora Bursatil SA. ``About 20 percent of shares are in the hands of small investors, so when they panic, there is a major selloff.’’

Market Gains

Since Uribe took office, the IGBC has risen 687 percent in dollar terms, and the peso has gained almost 7 percent against the dollar. The dollar bond due in 2012 has climbed to 114.25 cents on the dollar from 84 when Uribe began his first term, cutting the yield to 6.85 percent, according to JPMorgan Chase & Co.

``Uribe provides stability to a country in the Andean region, which, as far as business is concerned, has no stability,’’ says Charles Cassel, who helps manage $420 million in emerging-market assets, including Colombian stocks and bonds, at Florida-based INTL Consilium LLC.

Because Colombia’s economy is more dependent on small manufacturers and is more diversified than Bolivia, Peru, Ecuador and Venezuela, which mostly depend on oil and gas or mining, the country provides less fertile ground for nationalistic and populist sentiment, says Daniel Linsker, an analyst at London-based Control Risks Group, a risk consultant.

`Cannon Fodder’

``Colombia doesn’t have an economy based on natural resources, which provide such great cannon fodder for populist politicians,’’ says Linsker. ``There’s no sacred cow to protect from foreign interests, and that keeps voters pretty pragmatic and political parties pretty centrist.’’

In Venezuela, Chavez, 51, has stepped up his criticism of U.S. President George W. Bush’s policies in Iraq, taken control of heavy-oil ventures owned by multinational companies and increased royalties and taxes on oil production.

He has also publicly noted Uribe’s political stances.

``The world knows that Alvaro and I have different views about the economy and politics,’’ Chavez said at a May 15 press conference in London. ``Alvaro Uribe is a president of the right.’’

Chavez backed Bolivian President Evo Morales’s May 1 seizure of oil and natural gas assets owned by foreign companies such as Madrid-based Repsol YPF SA and Rio de Janeiro-based Petroleo Brasileiro SA. Chavez said his state oil company Petroleos de Venezuela SA would help Bolivia if needed.

In similar fashion, Ecuador seized an oil field from Los Angeles-based Occidental Petroleum Corp. on May 15.

`Shift to Left’

Chavez has also said he supports Ollanta Humala, the nationalist candidate in Peru’s June 4 elections who has promised to fight multinational companies he says are looting natural resources.

``I hope the shift to the left continues in Latin America,’’ Chavez said in London.

Uribe has mostly ignored the political divide in Latin America.

To the occasional Colombian critic who has called him right-wing or fascist, Uribe had this response during his May 17 speech in the town square of Armenia: ``The classification is obsolete and would be like calling the Europeans who fought Hitler and Mussolini `leftists.’‘’

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