Tag Archives: Colombia

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What causes Colombia’s economy to grow? What causes Venezuela’s economy to shrink?

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Political Map of South America
Political Map of South America

Would you like to have a growing economy? Then follow the lessons of Colombia.

Excerpt:

Colombia expects lower fiscal deficits in 2013 than in 2012, while economic growth is projected at 4.8 percent for both years, Finance Minister Juan Carlos Echeverry said on Thursday.

Latin America’s No. 4 oil producer has seen a strong recovery from the global economic crisis, recouping three investment-grade credit ratings and continuing to reap strong inflows in the mining and oil sectors.

Presenting the latest fiscal plan, Echeverry said the government had revised down the 2012 central government fiscal deficit target to 2.4 percent of gross domestic product from 2.8 percent previously, and the consolidated deficit to 1.2 percent of GDP from 1.8 percent. The consolidated deficit includes the central and regional governments.

The central government deficit target is seen at 2.2 percent of GDP in 2013, with the consolidated deficit at 1 percent.

“This fiscal plan is serious, reasonable, we’re not extracting liquidity from the economy, but injecting liquidity into the economy,” Echeverry told reporters.

The government expects the economy to grow 4.8 percent this year and next. Economic expansion was 5.9 percent in 2011, the fastest growth rate in four years, helped by high foreign investment and strong consumer spending growth.

Colombia has attracted billions of dollars in foreign direct investment over the past decade, mostly into the oil and mining sectors after U.S. military aid helped security forces deal crippling blows to leftist guerrillas and cocaine cartels.

Consumer prices have remained at steady levels in recent months, and economists expect 2012 annual inflation to fall within the central bank’s target of 2 percent to 4 percent.

The fiscal plan forecasts full-year inflation at 3 percent this year and next.

Under Obama, the United States has been running deficits of between 8-10% GDP. Revenue is the same as usual, but spending to reward reckless, irresponsible behavior has skyrocketed.

Would you like to avoid a shrinking economy? Then avoid the policies of Venezuela.

Excerpt:

Venezuela has devalued its currency, joining Iran, Argentina and others whose wars on math brought the same result. Some call this a “restorative.” It’s not. It’s what happens when big government hits a wall.

Venezuela’s monster 47% devaluation from 4.3 to 6.3 bolivars to the dollar, reportedly ordered by President Hugo Chavez from his hospital bed in Cuba, marks the reckoning for his regime’s big-spending ways in Venezuela’s low-growth economy.

[…]This devaluation is characteristic of all tyrannies, which benefit by effectively expropriating the savings of the private sector through monetary means rather than the more common thuggery.

Chavez’s meltdown is coming for the same reason devaluations are also shaking Argentina, which is undergoing a new fiscal disaster of its own, Egypt, which is going through a slo-mo devaluation that’s pushing up the price of food and prompted its Islamofascist rulers to actually urge people to eat less food, and Iran, whose madhouse economics has triggered hyperinflation.

It’s how dictators do business. This is Chavez’s sixth devaluation in the last decade of his big-spending power, following devaluations in 2002, 2003, 2004, 2005, 2010 and 2011. Every one of these devaluations inflates away some of his debts — but at the expense of the country’s savings and investment, which are snapped away through inflation.

What’s more, this devaluation, which was done to plug his deficit spending and prop up the state oil company, will only cover 60% of the country’s deficit, meaning more devaluations ahead this year, likely to take the bolivar to 8 by year end.

Venezuelan officials, predictably, claimed it was “good” as well as an “improvement” that protects the middle class against “speculators,” echoing the party line of establishment economists such as Joseph Stiglitz, former Bill Clinton adviser and chief economist of the International Monetary Fund, who in the past has called devaluations an economic ” restorative.”

Tell that to the panic buyers across Venezuela. There, terrified consumers who are buying goods ahead of expectations of soaring prices, while the poor have seen their life savings wiped out.

When Obama took office, a US dollar was worth over 1.20 Canadian. Today it’s worth about 98 cents. He has been devaluing the currency in order to pay for massive government spending. Private savings of individuals have been devalued, as a result. Inflation is a hidden tax on those who earn and save.

In the United States, we are doing the exact opposite of Colombia. We are embracing Venezuela policies, and expecting Colombia results. Why are we stupid enough to believe words instead of results? Socialism doesn’t work. Capitalism does work. We should choose what works.

News

FARC terrorist leader Alfonso Cano killed by Colombian armed forces

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Map of South America
Map of South America

From the Heritage Foundation.

Excerpt:

The armed forces of Colombia have scored a major battlefield victory. They finally hunted down, confronted, and killed the leader of the narco-terrorist Revolutionary Armed Forces of Colombia (FARC), Guillermo Leon Saenz, widely known by his alias Alfonso Cano.

A guerrilla for decades, Cano assumed the top leadership of the FARC following the natural death of founder Manuel Marulanda (2008) and the elimination of senior figures Raul Reyes (2008) and Jorge Briceno (aka Mono Jojoy, 2010).

Seen by some as a modern-day version of the “good revolutionary,” Cano—a life-long advocate of armed violence and terrorism—fell in combat with the Colombian armed forces as they rappelled their way into his secret jungle hideout. Cano was also indicted in a U.S. court for drug trafficking along with dozens of other FARC leaders and had a $5 million price on his head.

FARC is a Marxist terrorist group.

The Economist reports that the Colombian economy is also doing well.

Excerpt:

WHEN the figures are finally tallied, Colombia may prove to have weathered the world recession better than any other of the larger Latin American countries. After a slight contraction at the end of 2008, the economy has been growing modestly this year. This resilience stems from continued foreign investment, an increase in government spending on public works and easier money: since December the central bank has cut interest rates by six percentage points, to 4%, a steeper drop than anywhere in the region outside Chile.

[…]President Álvaro Uribe’s security policies have helped to restore confidence. Investment soared, from 15% of GDP in 2002 to 26% last year, says Mr Zuluaga. Private business has retooled. After many delays, the government has issued licences to expand several ports; this month it hopes to award a contract for the first of four big road schemes, costing a total of $7.5 billion over four years. It hopes for investment of up to $50 billion in mining and oil over the next decade.

And liberal MSNBC has more on the booming Colombian economy.

Excerpt:

…Colombia’s revival is benefiting U.S. economic and political rivals as much as or more than the U.S. itself.

The long delay in signing the treaty allowed Latin America’s fourth-largest economy to strengthen ties with China. It also damaged U.S. credibility in the region, says Eric Farnsworth, vice-president of the Council of the Americas in Washington. “The delay in passing this called into question the United States’ reliability as a partner,” Farnsworth says. “There’s a strategic component to this. It’s not just about economics and trade.”

[…]As talks between the U.S. and Colombia dragged on, Colombia and China forged plans for a rail link between the Pacific and Caribbean that could draw freight away from the Panama Canal. Colombian President Juan Manuel Santos aims for a trade deal with South Korea. To tighten his connections to high-growth Asia, he’s also seeking membership in the Asia-Pacific Economic Cooperation group. “While Washington was debating whether the accord with Colombia was opportune, we advanced in our foreign policy strategy,” says Trade Minister Sergio Diaz-Granados.

Santos has cooperated more with his South American neighbors, organizing a meeting of finance ministers to discuss ways to protect their currencies and economies from the debt crisis in the U.S. and Europe. He supports a stock trading platform with Colombia, Chile, and Peru and wants to bring Mexico and Panama on board. Exports to Brazil have surged tenfold. While the U.S. remains Colombia’s biggest export market, with $16.8 billion in 2010 sales, up 30 percent from a year earlier, sales to China more than doubled last year, to $1.2 billion. Sales to the European Union are also rising, to $5.4 billion this year through August, more than in all of 2010. An EU trade accord could come next year.

The government has reduced cocaine cultivation 37 percent and halved the number of insurgents to about 8,000. Improved security has spurred enough growth to win an investment-grade credit rating from Standard & Poor’s as well as investment from billionaires. Colombia’s victories over the guerrillas opened up swathes of countryside to exploration for oil, gold, and coal. Mexican billionaire Carlos Slim’s push into crude has helped fuel foreign investment that the government says may reach a record $12 billion this year. The economy grew 5.2 percent in the second quarter.

The U.S. faces more competition from Colombia’s neighbors and Canada. In 2010, U.S. agricultural exports to Colombia fell more than 50 percent from 2008, to $827 million, as Argentina’s more than doubled, to $1 billion, according to a report by Senator Richard Lugar’s staff. Diaz-Granados attributes the U.S. setback to the delay in the free-trade agreement.

An August accord reduces or ends Colombian tariffs on Canadian wheat, paper, and machinery. Bank of Nova Scotia, Canada’s third-largest lender, agreed in October to buy 51 percent of Banco Colpatria Red Multibanca Colpatria for about $1 billion—Scotiabank’s largest international takeover. “This is not the Colombia of old,” says Brian J. Porter, group head of international banking for Scotiabank. “The more we looked at Colombia, the more excited we got about the economic potential.”

We really should have signed that trade deal 3 years ago – it would have helped out economy a lot.  But unions got Obama elected, and the unions decided that the trade deal needed to be held up for 3 years. And that’s one of the reasons why we’ve had over 9% unemployment. Our economic policy is being set by unions, not by economists. But in Colombia, economic policy is set by economists, not unions.

News

House passes free trade deals with Colombia, South Korea and Panama

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From Investors Business Daily.

Excerpt:

The biggest free-trade pacts since NAFTA were passed by the House Wednesday night, with the Senate likely to follow. As a result, America will reap 250,000 jobs and $13 billion in exports. Where are the celebrations?

The strangest aspect of the passage of free trade treaties with Colombia, South Korea and Panama, with final votes taken after five long years, is the disconnect between the big economic gains expected for the U.S., and the reticence of congressional Democrats and the White House, both of which finally got something right on the economy.

As we went to press, the pacts had been passed by the House, with the Senate expected to vote soon. With bipartisanship like that, lawmakers should be cheering loudly for a true “jobs bill” that costs nothing.

Yet as a Democratic aide told Roll Call on Wednesday, “Republicans don’t want to give the president a victory, Democrats are split and everyone is distracted.”

Excuse us, but this is some of the best economic news in three years. It deserves a victory dance.

It’s a fact these treaties will bring new orders for factories, save family farms, strengthen strategic alliances with countries well worth having as allies, and open up breathtaking new opportunities in fast-growing markets. It needs to be acknowledged.

[…]President Obama paid lip service to the treaties, but wasted nearly three years attaching protectionist amendments and dithering. It harmed the economy and never changed this fact: Free trade had to pass if there was to be a real recovery.

Economist Greg Mankiw of Harvard University lists free trade as the #2 top item that economists of all ideological stripes agree on. This is a no-brainer.

Passing the free trade deals is important because it would make up for other anti-business policies of the Obama administration.

Excerpt:

Obama appointees at the National Labor Relations Board (NLRB) have not only blocked Boeing from making planes in South Carolina, but they have greased the speed of union elections, made decertification votes impossible, changed the requirement that a majority of workers vote for a union, and required almost every workplace in America to put posters up advising workers of their unionization rights.

The Obama Administration claims to want to double exports and support free trade, but it took it nearly three years to send the pending trade agreements with Panama, Colombia and South Korea to Congress. Which means that in all this time American companies have been paying higher tariffs for exports.

The Obama Administration has proposed 219 new rules affecting industries, each of which will cost at least $100 million to comply. While the Washington legal business is growing, every industry and business is affected, scared, and confused by the massive new proposals. Small businesses are especially overwhelmed and must hire lawyers to understand and comply with the massive amount of new regulation.

The Obama crown-jewel “achievements” of the new health care and Dodd-Frank financial laws adversely affect almost every American business, totaled almost 3,000 pages of statutory language, and will result in huge costs on employers.

Let’s hope the Senate passes these deals and Obama signs it. We need lower priced goods in a recession, and we need more markets to sell into. If this passes, it will be the first pro-growth action taken by the administration in three years.