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Author`s name Michael Simpson

Colombia's Uribe Stuck Between a Rock And a Hard Place - 11 April, 2003

As Washington pushes Bogota to finance expensive military actions against rebel groups, the IMF asks for more cuts in public expenses

President Uribe's alliance with the US administration turns into a serious financial problem for the weakened economy of Colombia. The hard line policy of going ahead with an open war against rebel groups endangers country's precarious financial stability of this South American Country.

The last IMF mission to Bogota said that Colombia had to carefully look into its public deficit and reduce the increasing foreign obligations. "There's no more space for public deficit", said Robert Rennback, IMF mission Director. Moreover, urged Colombia's officials to comply with previous deals and keep public deficit in 2.5% of the GDP, no matter the case.

However, Colombia has always financed its war against insurgency by taking loans from multinational credit institutions. Therefore, to comply with IMF exigencies could be negative for its efforts to insist on the hard line policy toward guerrillas. Even when the US Government collaborates by providing financial aid through the "Colombia Plan", the public sector has to expend large amounts of money to cover up increasing military expenses.

In the long term, this could be deadly for Colombia's financial system and country's credibility. After IMF warning this week, this Andean country will be more restricted to bind debt into the international market, as investors will put an eye on them. Therefore, it is possible that Uribe's administration concentrates in restructuring public expenses to comply with the IMF.

Uribe's dilemma now is to decide between keeping the hard line policy and endanger macroeconomic stability or to sit back at the negotiations table and ease pressure over the finances. Last week, FARC leaders offered Uribe a resolution to his problems, as this rebel group proposes to reinitiate peace talks. The President of Colombia said no, while keep on asking for more help from the United States.

Perhaps, after IMF pressures, Uribe may change his mind and understand that, at the end of the day, peace is cheaper than war.

Hernan Etchaleco
PRAVDA.Ru
Argentina

Photo: Colombia's President, Alvaro Uribe.

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