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July 23, 2014
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Despite growth, Colombia still deeply unequal

A resident crosses a street guarded in Ubate, north of Bogotá.
By Carolina Thibaud
Herald Staff

Concentrated land ownership, regressive tax system to blame for alarming gap in wealth

Last year, the Colombian economy surpassed Argentina’s as the region’s third largest. Economists attributed its rise to a stable currency, low inflation and steady GDP growth, with the country’s economy surpassing expectations and growing at 4.3 percent in 2013.

Centre-right President Juan Manuel Santos — who was re-elected on Sunday and will serve a second four year term — has been praised for his investor-friendly policies, which have lured foreigners to the country following significant security gains.

But despite positive economic figures, Colombia remains an extremely unequal country — in fact, the seventh most unequal country in the world according to a 2012 World Bank report.

Land ownership is, perhaps, the most visible sign of inequality: less than one percent of the country’s population owns more than 60 percent of the land.

The elite — who holds a large percentage of the country’s wealth and breeds many of its leaders — has rejected agrarian reform and has made small farmers’ subsistence almost impossible. This, in turn, has historically led small farmers to resort to illegal crops, such as coca, to sell to drug-traffickers.

The poverty gap between rural and urban areas has had a significant role in fuelling the 50-year-old armed conflict in Colombia — in 2012, extreme poverty in rural areas was 3.5 times higher that in cities. In some areas of the country, joining the rebels — either the FARC or the ELN — was seen by many as the only option to get by.

But concentration of land ownership has also increased in recent years as a consequence of forced displacements, with a local NGO estimating that around six million hectares were abandoned by people fleeing the conflict. Those displaced often ended up swelling the ranks of the cities’ poor.

Discontent among small farmers reached its peak during a national strike that paralyzed Colombia for several weeks in August last year and provoked a sharp drop in Santos’ approval rating.

A second walkout this year threatened to derail his re-election bid and forced the government to promise that it would tackle reform.

Conservatives have had it easy

But a regressive tax system remains the main culprit of inequality in Colombia, the World Bank argued in 2012.

In a report entitled Breaking with history: why Colombia needs a more progressive tax system, the body recommended raising the income tax and spending more on social programmes for the country’s poor.

With voters in Colombia often thinking of leftist candidates as allied to rebel groups, conservative candidates have historically had it relatively easy at elections and have kept social spending at a considerably lower level than in the rest of Latin America.

In Sunday’s runoff, for instance, centre-right Santos faced right-wing Oscar Iván Zuluaga, a former Finance minister under former president Álvaro Uribe. With the two candidates bitterly divided over what to do with the ongoing peace process with the FARC — Santos started the negotiations 18 months ago and Zuluaga had vowed to suspend them if he got elected — their conservative economic views seemed to be the one point on which they didn’t disagree.

Finance Minister Mauricio Cárdenas said last week that he expected economic growth to accelerate this year, which led investors to bet on the Central Bank raising interest rates to control rising inflation.

Construction, mining and agriculture are expected to keep fuelling economic growth and Santos is expected to maintain investor-friendly policies during his second term in office.

But reducing inequality — to at least reach similar levels to those of Chile or Peru — will remain his main economic challenge and the only way to guarantee long-lasting peace in Colombia.

@carothibaud

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