July 4, 2005

Colombian Government Tries to Woo UK Investors

by Sophia Hoffmann

At a conference organized by the British and Colombian Chamber of Commerce in London on June 29, Colombian ministers and leading members of the Colombian private sector presented a rosy picture of their country to foreign investors, pointing to the excellent investment climate in Colombia. Sabas Pretelt, Colombia’s minister of the interior and justice, discussed President Alvaro Uribe’s democratic security and paramilitary demobilization programs, while Jorge Humberto Botero, minister of industry, trade and tourism, explained why Colombia needed to apply more free-market reforms.

Sabas Pretelt, Colombian minister of interior and justice, emphasized what he claimed to be the positive effects of the government’s democratic security program and the new law on justice and peace, which provides a framework for the demobilization of the country’s right-wing paramilitaries. “The state must be present in every single corner of Colombia and President Uribe took the police to 125 municipalities, where there were none before. Nearly all mayors now work from their municipality’s office, something they were afraid to do before,” said the minister.

“There has been a substantial change in Colombian security, particularly for those interested in investing. Homicide rates have fallen from 30,000 per year to 7,000 per year and there has been a huge drop in kidnappings. Foreigners do not suffer this menace that much anymore,” he added.

Pretelt announced that the fight against drug trafficking was gaining pace and stressed that the process respected the enemies’ human rights. “The government is building 25,000 new prison spaces, the drug lords are against the wall. It has all been done within a framework of Human Rights: the soldiers and the police learnt first about human rights before marching and shooting.” Although he admitted that rights violations were still occurring, Pretelt claimed that such abuses were only taking place on part of the “FARC terrorists.” “We have killed 1,500 paramilitaries.” added the minister.

Colombia’s high unemployment rate of 12 percent has posed a challenge to the paramilitary demobilization effort, as thousands of former paramilitaries entered the cities and could only find work sponsored by the government. “The private sector remains suspicious. If I send five former militiafighters to a bank to give them work, the bank will think that they will monitor and pass on the ins and outs of the bank director,” stated the minister amid laughter from the audience.

“The treatment is not easy. Many of the guys are full of hate and suddenly they are in the city and they are confused. Many cannot read. Slowly we are developing job opportunities, but it’s not an easy task.” But Pretelt denied that the demobilization would lead to increased crime rates, as has been the development in other post-conflict countries such as El Salvador and Guatemala. He added that when a few hundred demobilized fighters express their discontent, this situation enters the international media, whereas the majority of the demobilized have been very well placed.

Two discussants, the former British Ambassador to Colombia Sir Tom Duggin and the Oxford academic Malcolm Deas, shared the minister’s position. Duggin added that a “military presence is only one part of the answer and Democratic Security will not work on its own. Social and economic change, wide access to health and education, is needed. It is a great shame that the referendum failed, it blocked policies that would have brought about change for the good.”

Jorge Humberto Botero, the Colombian minister of industry, trade and tourism, followed with a highly technical presentation on investment flows to Colombia, which appeared to disappoint the audience. The numbers presented by the minister showed a decline of investment flows from the UK in recent years and were contested by former ambassador Duggin. The minister explained that “sometimes investment from UK firms are registered as coming from another country, due to technicalities,” but promised to double-check the figures and get the latest update from the ministry.

According to the minister, the failure of Latin American countries to reduce poverty was due to the insufficient application of market oriented economic policies. “The economic achievements in Latin America have not reduced the proportion of poverty amongst the population. The reason for the failure is not the market economy, but the role of the state in the economy and that the market economy has not been developed enough,” said Botero.

“We have not advanced enough in correcting the public finances and in making public expenditures more efficient. For that reason we have to persist in the correction of the structural deficits of the public finances and to advance more in the quality of public policy,” he added.

Colombia’s favorable investment climate was underlined by Jorge Londoño, president of Colombia’s largest private bank Bancolombia and British investor John Field, a member of the Wood Group, a global energy services group. “With the new laws, the legal stability for investors is very much guaranteed,” said Londoño, “private investment is growing at a rapid rate.” The banker added that inflation, currently at five percent, was under control and that the financial sector was recovering very well from the crisis of the late 1990s. “There is a convergence between the views of the public and private sector and this is very helpful,” he said. Colombia’s large external governmental debt remained problematic.

Field stressed that business in Colombia was excellent, that processes were transparent and that there was no discrimination against international companies. “Security is a concern, but manageable,” he said.

The next panel discussion entitled “Corporate Governance and Social Responsibility” provided a platform for Augusto Solano, president of the Colombian Association of Flower Exporters (ASOCOLFLOR), and a corporate affairs officer from British Petroleum (BP), Mauricio Gimenez.

Flowers are Colombia’s third largest export and ASOCOLFLOR employs nearly 95,000 people in the country. The flower industry is notorious for bad working conditions and ASOCOLFLOR has refused to sign up to international environmental and labor standards, citing trade discrimination as the reason. Companies within the association stand accused of unfair and harsh working conditions.

Nevertheless, Solano gave an extremely favorable presentation that highlighted the environmental and human resource achievements of ASOCOLFLORES through its sustainable development program “Florverde”. Following Solano’s speech, Gimenez from BP also gave a predictably favorable presentation of the great importance that his company attached to Corporate Social Responsibility. Some 100 people attended the one-day conference, representing a mixture of businesses, international organizations and academia.

Sophia Hoffmann is a reporter for Emerging Markets.

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