Journal of Commerce / June 30, 1998
By Larry Luxner
WASHINGTON -- Andres Pastrana's victory last week in Colombia's presidential runoff election is being welcomed by the U.S. and Colombian business establishment as a breath of fresh air after four years of deteriorating relations between the two countries.
Mr. Pastrana, the Conservative Party candidate, won 50.4% of the 12 million votes cast, easily beating Liberal Party challenger Horacio Serpa, who garnered 46.5%. Mr. Pastrana will be inaugurated Aug. 7, the last day of office for President Ernesto Samper -- whose entire administration was hobbled by charges he accepted up to $6 million in campaign contributions from the Cali drug cartel.
"This is very good news," said David A. Ramirez Garcia, a consultant to the Industrial Bank of Japan Ltd. and a former economic adviser to Samper.
"The markets have experienced dramatic change when compared to the situation just two or three weeks before the elctions," said Mr. Ramirez. "The Bogota stock exchange rose 10% the first trading day after the election, and the peso has strengthened against the dollar, going from 1,394 to 1,365 pesos to the dollar in the last three days. Confidence here has boosted, and there are clear signs the new government is going to make tight fiscal adjustments."
Michael Skol, chairman of the U.S.-Colombia Business Partnership in Washington, says Mr. Pastrana's victory "should have a very positive effect on investment for several concurrent reasons" -- perhaps the most important one being psychological.
"There was just no possibility of any decent, normal relationship with Colombia until President Samper had left," said Mr. Skol, a former U.S. ambassador to Venezuela. "Frankly, either candidate would have sparked the revival of [bilateral] relations, giving both countries the opportunity to get back together again. The U.S. government very definitely wants to do that. We just can't afford another four years of schizophrenic relations with Colombia."
"In the case of Pastrana, the outlook is even better, because one of the major accusations against Samper was that it was the weakest of any recent government in Colombian history. Samper used money and the state to help him politically. One of the results was a kind of populist backlash away from economic reform and investment. Pastrana is a free-market capitalist, and his economic philosophy is far more in accord with U.S. ideas than were Serpa's."
Skol adds that a long-running guerrilla war that not only has left thousands of people dead but also scared away several U.S. and foreign oil companies "is really the most agonizing problem as far as Colombians are concerned. Pastrana obviously considers [stopping] it his No. 1 priority."
A month before the election, the Overseas Private Investment Corp. -- which had been prohibited from insuring U.S. projects in Colombia -- resumed that coverage following President Clinton's decision not to decertify Colombia's anti-drug efforts, as he had done in each of the previous two years.
"The injection of U.S. capital and technology in the development of the Colombian economy is one that creates jobs and a better standard of living for both our countries," said OPIC's president and CEO, George Muņoz, following a visit to Barranquilla, Bogota and Cartagena. According to OPIC spokeswoman Allison May Rosen, the self-supporting federal agency has supported nearly $700 million worth of investments in Colombia since 1991, including GPU International's Termobarranquilla gas-fired power plant ($350 million); Virginia-based KMR's Termovalle power facility ($200 million) and KMR's Mamonal electric facility in Cartagena ($130 million).
Ms. Rosen said that because of President Clinton's decertification of Colombia's anti-drug efforts in 1996 and 1997, "our programs were not able to enter into new commitments." But following the March 1998 declaration of a national-interest waiver for Colombia, "we are now open for business again." She said 20 infrastructure projects are currently being considered for OPIC political risk insurance and other financing; together, these represent potential investments of $830 million.
"Some of our customers had projects in abeyance because they couldn't get OPIC coverage," said Robert Petterson, vice-president of Caterpillar Inc. in Peoria, Ill. Mr. Petterson, whose company supplies heavy-duty equipment for Colombia's oil and gas industry, added that those projects will now likely go through.
Adds Michael Curtin, vice-president of Bechtel Enterprises in Washington: "The reopening of OPIC and Ex-Im Bank financing certainly helps U.S. companies doing business in Colombia. Judging by all sources, this election was clean and open, and this time not tainted by drug money. The president-elect has a significant political history as the mayor of Bogota, he's experienced, and I think he'll bring that experience to bear in negotiating a peace treaty with the guerrilas."
Colombia still faces other serious challenges, noted Ramirez, but he predicted that Pastrana's selection of Juan Camilo Restrepo as the country's new finance minister will go a long way toward assuring investors. Ramirez says the new president will also continue the privatization of long-distance services begun under Samper and possibly restructure state oil entity Ecopetrol, "because the new administration is much more market-oriented than if Serpa had won."
Concludes Caterpillar's Petterson: "I think that the evident difficulties between our country and Colombia under the old administration had a negative impact on investment. There are lots of opportunities for people to invest in the developing world. You need to give them reasons for choosing a particular country, not reasons to stay away from it."