There has been a four-decade long conflict between government forces and anti-government groups, such as the Revolutionary Armed Forces of Columbia (FARC) who are funded by the drug trade, has escalated over the years. Since about 2002 the violence has decreased a slit amount because of the lack of the military and popular support necessary to overthrow the government. However these groups of insurgents have continued to attack civilians. Large areas around Columbia are under the revolutionary influence.
By the end of 2006, more than 31,000 former governments’ officials had ceased to function as long as the formal organization the United Self Defense Forces of Colombia (AUC).
When this occurred criminal groups arose and members included former government officials. The Colombia Government has made efforts to advance government control throughout the country. In order to understand how corruption is affecting Colombia, we must first examine concrete economical statistics. The Colombian Peso exchange rate depreciated 6. 64 percent against the US Dollar during the last 12 months.
The Colombian Peso spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the COP.
While the Colombian Peso spot exchange rate is quoted and exchanged in the same day, the Colombian Peso forward rate is quoted today but for delivery and payment on a specific future date. Colombian pesos (COP) per US dollar: 1,869. 9 (2010) 2,157. 6 (2009) 2,243. 6 (2008) 2,013. 8 (2007) 2,358. 6 (2006) According to the CIA World Factbook, Colombia is ranked 59th in exports and 54th in imports. In May of 2011 Colombia exports were worth 4704 Million USD and imports were worth 4931 Million USD.
Their major exports are petroleum, coffee, coal, nickel, gold and, nontraditional exports. Their major imports are industrial and transportation equipment, consumer goods, chemicals, paper products, fuels, and electricity. The total population in Colombia was last reported at 45. 9 million people in 2010 from 16. 0 million in 1960, changing 187 percent during the last 50 years. Colombia has 0. 67 percent of the world? s total population which means that one person in every 150 people on the planet is a resident of Colombia.
The unemployment rate in Columbia from 2000 until 2010 averaged at 14. 7 percent. The highest percentage was in January of 2001 when it was 20. 99 percent. The lowest percentage was in November of 2007 when it was 8. 91 percent. Labor force is the number of people employed plus the number unemployed but seeking work. The non-labor force is those who are not looking for work, those who are institutionalized, and those serving in the military. According to the World Bank, the Colombia Gross Domestic Product is worth 288 billion dollars or 0. 46% of the world economy. Colombia’s average GDP was 60. 55 billion dollars and reached the highest dollars in December of 2010.
Colombia is a free market economy with major commercial and investment ties to The United States. Transition from a highly regulated economy has been underway for more than 15 years. Colombia’s average annual economic growth rate was of over 5% from 2002 to 2007. The inflation rate in Colombia was last reported at 3. 3 percent in August of 2011. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well-known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.
Corruption’s negative impact on Colombian Foreign Direct Investment is reflected by the poor image of Colombian government by its citizens. The Colombian government, although less developed and more corrupt, is structured similarly to the United States’ government. However unstable it may be, it is a republic and consists of three branches: executive, legislative and judicial. Also like the United States, Colombia is dominated by two major political parties, the Colombian Conservative Party and the Colombian Liberal Party.
Because of the natural radicalism of the two parties, two major civil wars have resulted from their existence, The Thousand Days War and La Violencia. The Thousand Days War is a prime example of how the corruption of the Colombian government has made Foreign Direct Investment a very difficult achievement for Colombia. The Thousand Days War was a civil war fought between the Conservative Party of Colombia and the Liberal Party of Colombia, sparked by corruption. In 1898, Conservative Party member Manuel Antonio Sanclement, was elected president of Colombia.
This was very controversial because it was believed that significant election fraud had made this possible. As Sanclement was an adamant Liberal Party oppose, the Colombian Liberal Party waged war. The war, which lasted 4 years, claimed an estimated 100,000 lives. As devastating of a loss as 100,000 people is, the worst outcome of The Thousand Days War may be that it did little to resolve the extreme differences between the Liberal and Conservative Parties of Colombia. The Thousand Days War was soon followed by a second civil war more commonly known as La Violencia. La Violencia was also a war founded on corruption.
It was sparked by the assassination of the Liberal Party leader Jorge Eliecer Gaitan. After the assassination in 1948, Conservative Party leader Laureano Gomez, was the uncontested elected president in 1950. Under Gomez’s power, there was an increased rate of violence, specifically by the liberals of Colombia who were very upset about Gomez’s rise to power. Gomez was overthrown by a military coup led by General Gustavo Rojas Pinilpla in 1953. However, Rojas proved to be just as corrupt his predecessor and was soon overthrown by the Colombian military, with the support of both the Conservative and Liberal parties.
La Violencia, a time properly named after and extreme period of violence and conflict, lasted from 1946 to 1957. Within that timespan it claimed an estimated 300,000 Colombian lives. The following chart shows the number of Colombian citizens who are murdered per 100,000 people by year. What is more concerning than its high rates, is that it continued to increase even after La Violencia. These extreme rates of murder and frequent conflicts are heavily dependent on the poor image citizens have of the Colombian government. There is a lack of trust in the Colombian government.
Historically, governmental corruption is common practice in Colombia, just as it is a frequent occurrence that violent rebellions and civil wars take place in order to transfer power between the two political parties. This poor government infrastructure and lack of control allows corruption to run wild in Colombia making it a very difficult place for Foreign Direct Investment. This poor image of government in Colombia did not see much improvement after La Violencia. Another violent problem emerged with narco-terrorism. Colombia has become notorious for its cocaine production. In 2008, Colombia was the sources of 50% of the world’s cocaine.
It is an industry which is very frequently held out violently, leading to what is known as narco-terrorism. In 1990, three presidential candidates were killed by narco-terrorists. With the rise of drug trafficking in Colombia, it appears that narco-terrorists have more control than the Colombian government. Although Colombian government has always struggled with corruption, there have recently been many signs of improvement towards a better country for Foreign Direct Investment. Within the past decade, several laws have been passed to weaken drug cartels and strengthen governmental control.
From 2002 to 2008 Colombia has seen a decrease in many historically struggling areas. Its homicide rate dropped 44%, its kidnapping rates dropped 88%, its terrorist attacks dropped 79% and its attacks on country’s infrastructure dropped 60%. These tremendous improvements show an increase in governmental authority in Colombia. If Colombia can continue to improve in these areas and demonstrate that its government can have more control over its people, without corruption, it will become a much better candidate for Foreign Direct Investment.
In August 2010, President Santos, introduced a legislation that would distribute industry incomes to Columbians who have lost their land due to violence. He also is trying to make improvements through domestic security. Columbia is third largest exporter of oil to the United States. Foreign direct investment from 2008 to 2009 went from $10 billion to $7. 2 billion. Even though records show that it has dropped $2. 8 billion, in 2010 it began to recover their losses through the oil sector. Because of their financial crisis the economy didn’t grow significant amount till 2010 then it grew 4. %.
Before that the growth was a low percentage. With the challenges that Colombia’s faces it requires major improvement to sustain economic expansion. The outrageous amount of corruption in Colombia is hindering its economy and stopping it from becoming a safe and stable country. Although it is one of the oldest democracies in Latin America, Colombia has some of the most corrupt elections. An estimated 130,000 candidates are running for election at the local, regional, and national levels. 10% of these candidates have proven criminal records.
About a third of their senate is currently under investigation for parapolitics and many of which are already in jail. The corrupt election are stopping Colombia from having a stable government which is stopping foreign investors from taking the risk of putting money into Columbia, meaning less jobs and poorer quality of life for the average Colombian. In 2005 the parapolitics scandal was uncovered and left the Colombian senate in chaos. The Colombian senate seats 102, and with 51 senators now being investigated and 29 in jail, they are virtually paralyzed. As each senator is arrested, it delays the agenda for legislation even more.
Paramilitary leaders have confessed to hundreds of thousands of crimes including murders, abductions, rapes, narcotics, and extortion. They have also confessed to backing many politicians in an attempt to be protected outside of the law. Many members of the former president of Colombia, President Alvaro Uribe’s party were arrested for parapolitics showing the world how unstable the Colombian government is. One of the arrested politicians includes the president’s cousin Mario Uribe who has had very close ties to the president both family-wise and politically.
This influenced the United States greatly and in 2007 a package of military aid destined for Colombia from the United States was blocked in the U. S. senate because of fear of election corruption. Colombia depends on the U. S. greatly, as it is number 3 in the world for U. S. military aid. The aid is used to assist in fighting the drug war and without it; more violence and corruption will take place. Paramilitary has a huge effect on the elections conducted in Columbia. There are around 20,000 paramilitary fighters in the country all growing from their creation in the 1980’s.
In 2010 armed groups killed over two dozen candidates running for election and at the same time they invested large sums of money to fund their own candidates’ campaigns. Along with bribing people to run for them, these armed groups will also pay the public for individual votes. This can be as much as $40 per person in some places. Other times they will also use sheer military force to intimidate the public into voting for them. Many of the jailed parapoliticians have others running in their place as puppets while they are still in jail.
Caracol news agency reported that 18 of the candidates in 2010 were “political front men” for ex-senators. There was an increase in the amount of women running for election which usually is considered a good thing. The truth is that the ones with the best chance for election were being backed by paramilitary families in an attempt to keep seats lost by jailed parapoliticians. The other big problem in Colombia its enormous drug trade and the negative effect it has on the economy.
Columbia is the world’s largest cocaine producer and accounts for 43% of coca cultivation (the crop used to make cocaine). 0% of the cocaine found in the United States is Colombian. Combined, Colombian and Mexican drug cartels make an estimated $4. 6 billion exporting to the United States per year. Overall Columbia’s drug trade is about $10 billion / year which is equivalent to 25% of the countries legal exports. In 2008 81,000 hectares of land were being used for illegal coca cultivation. These are staggering numbers and makes you wonder, how is all of this being allowed to happen? If Colombia was not as corrupt as it is, this wouldn’t happen.
Many of the drug lords use their influence and resources to pay off politicians, police, and military to turn a blind eye to their drug trade. Attempts have been made to stop this massive drug trafficking but so far it has only slowed it down. Colombia’s defense spending is now at $12 billion per year which is triple the average defense budget of other South American countries. Along with an increased defense budget, the United States has also committed an additional $6 billion since 2001 to help crackdown on the coca production. These are large sums of money that could be spent in other more productive ways.
Such as, creating a better national infrastructure and creating jobs. $18 billion is a lot of money to invest in an economy, and currently they are losing all of that potential production because drugs are such a big problem. Drug trafficking and election corruption are both hurting the Colombian economy. Billions of dollars are being spent to stop the corruption but to this point there is still a great deal going on. In order for Colombia to have better production in a global economy, they must prove to the world they have a stable government, and reduce the risks associated with investing in them.
Over the past few years, foreign direct investment in Colombia has been gradually increasing as their country has been fighting the corruption and violence that had been prominent. Some of the most advantageous areas for FDI are technology, fuels – such as coal, oil and natural gas — and infrastructure. One reason that fuel is a wise choice for FDI is because Colombia has much more oil than is being used by its population: This excess would allow foreign companies access to enough oil to run more plants at a cheaper cost. Infrastructure is also important because Colombia’s current ease of transportation leaves much to be desired.
If a company decided to invest in Colombia’s transportation, it would draw more investors in as said transportation costs decreased. The Colombian government has been actively working to encourage local companies to develop the roadway systems across the country to attempt to make Colombia more attractive to foreign investors. While several countries are investing in Colombia, the United States is the lead investor by over 30%. It is certainly beneficial to have a strong investor, however it can be problematic for one country to control so much of Colombia’s foreign direct investment.
Having investments in Colombia is helpful for the United States because Colombia is a relatively close population of cheap labor without many of the highly-regulated working conditions that are found in more developed, less corrupt countries. As a surprisingly strong investor, Anguilla contributes 20% of Colombia’s foreign direct investment. For a country whose economy is largely based on tourism, it is interesting to see their commitment to a local country that has very little tourism because of its reputation for violence, drugs and corruption.
Foreign direct investment has been increasing in the recent years due to Colombia’s higher regulation of corruption and desire to control the violence in the streets. Many businesses are beginning to trust Colombia to protect their product rights and property, although Colombia is still far from stable and dependable. While crime rates are slowly decreasing in Colombia, most businesses still avoid investing in Colombia because of its reputation for extensive riots and drug wars.
If Colombia can decrease their reputation for instability and corruption, they have every opportunity to successfully draw in investment and provide a safer, better future for their citizens. As stated throughout this extensive research paper, corruption can cause a country many problems. One aspect that it affects the most is trade. Countries and corporations are less attracted to corrupt governments opposed to more stable governments.
According to Mauro, who analyzed 94 corrupt countries, GDP increased by four percent with a decrease of 2. 38 on his teen point scale; GDP per capita increased by . percent. Mauro contributed to the book, The State in a Changing World, World Development Report 1997. Columbia has had corruption problems for an extended period of time now. Parts of the government have tried to stop such corruption but cooperation from all parts is needed to progress. In order for Columbia to progress they must start at the root. They must analyze what causes corruption and approaches other countries took to successfully start eliminating corruption. A few of the reasons corruption is practiced are to avoid penalties for illegal actions or to get around legal regulations.
One overwhelming problem in Columbia, that is no secret to most, is drug trade. Drug cultivating and trade in Columbia is evident due to its geological location and ideal climate. In order to transport these drugs and have farms some drug lords may need to pay off government officials so they can “turn their eyes” on such activities. In this case both the drug lords and government officials benefit. Corruption will be hard to fight in Columbia due to the fact that the drug industry is estimated to be valued in the billions and whenever there is such a significant amount of money on the line, people are willing to do anything.
Regardless of the reason, usually it is for an individual’s personal gain, companies included. Institutional corruption usually arises when government officials have a significant amount of power but little accountability. Most of the time, the officials must have their own financial incentives in order to partake in the corruption. The more control government officials have to regulate corporations the more corruption is likely to occur. If the probability of being caught or punished is low, people will tend to risk dealing with corruption.
There are two approaches that must be taken to fight corruption, the first approach must be an institutional approach and the other must be a social approach. To begin an institutional reform towards corruption, Columbia must limit authority. Columbia has a questionable democratic government. With all the corruption going on, the polls could be altered. This is where the social approach comes into play later on. There most prominent branch is the executive branch. This supports the fact that Columbia’s authorities may have too much power.
Privatization is believed to be able to reduce corruption by limiting the amount of government interaction with companies. In order to be successful there must be certain regulation put into place. The only problem with this approach is that it has already been taken by Columbia, and while it did improve corruption, it was not notable enough. Columbia has gone as far as privatizing its water supply and while it had many critics at first, it turned out to be a good decision by their part due to the correct regulations put into place. Other suggestions are to increase liberalization by reducing tariffs.
This will lead to officials having less access to 1bribes. Competition among public services can also reduce corruption by eliminating monopoly type organizations. By increasing accountability, corruption can be decreased. Accountability includes stricter enforcement and easier detection mechanisms. Accountability can be increased through many ways. Freedom of information legislation can help. To better explain freedom of information legislation, and example would be the Ugandan government began posting prices for services and activities such as registering a car or starting a small business.
This eliminates questionable pricing and increases transparency. Another tactic to increase transparency is to implement financial disclosure among government officials. This tactic makes government officials income and assets public. Some South American countries have already began this practice; countries such as Argentina, Brazil, and Chile. Government expenditures and income can also be made public for transparency purposes. This way money won’t go missing and if it does the people will know; this is known as an open budget process.
Legislative oversight can benefit Columbia greatly in terms of eliminating corruption. Since Columbia must give more power to its legislative branch rather than its executive branch. A recent example has been one of Columbia’s neighbors, Brazil. The congressional impeachment of President Fernando Collor de Mello demonstrated the strength of the legislative branch. The Brazilian senate has also set up a special committee to investigate potential fraud in selling government bonds. Columbia’s senate should take initiative and also set up some sort of committee to investigate corruption charges.
These methods won’t completely eliminate corruption and none will come close to even making an impact if it’s the only method used but if they are combined corruption and decrease considerably. An incentive to avoid corruption would be stricter sanction. By increasing the severity of the punishments people face a higher risk factor when participating in corrupt actions, thus leading them to think twice about their actions. Sanctions may include but are not limited to minimum sentences for taking part in corrupt activities or denying public services for any entity offering bribes, this includes people or companies.
Columbia was already on somewhat of a right track when it comes to strengthening their judicial branch’s power. In 1991 Alfonso Valdivieso was appointed attorney general. In Colombia the Attorney General cannot be dismissed or reappointed and he is given investigatory powers. Valdivieso gained world recognition for prosecuting high ranking drug lords and government officials. I would recommend Columbia to ask Valdivieso for help, knowing that he is a reliable source when it comes to corruption. He can’t be Attorney General again but if special unit is formed to combat corruption, he is definitely a guy that should be taken in mind.
This concludes possible ways to avoid and reduce corruption from an institutional view point, reducing corruption from a social approach is rather different. The way people are raised and their surroundings affect their views on many things including corruption. If children are raised in a corrupt environment, they will view it not only acceptable but almost necessary. It’s a top down effect where government officials and corporation leaders are at the top. They must set an example for the public to look down on corruption and not endorse it.
Public Relations Campaigns can be put into effect to better inform people on the consequences and harm done by corruption that is not too clear. Campaigns can be executed through mass media, community activities or school programs. A few key points that should be emphasized are the effect that corruption has on things such as public services, investments, and inequality. All of these aspects are affected in a negative way. Columbia’s unemployment rate is 11. 8% and its Gini index is 58. 5. These numbers could improve with by decreasing corruption but this fact isn’t evident to most of the population.
If people feel like they have a say in the situation and can make a change, they will be more actively supportive. These campaigns should aim towards making people feel as if every little bit of help counts. In Argentina a non-government organization was formed to inform the public about corruption. The organization consists of television and radio ads. Another positive use of media to combat corruption is investigative journalism. Investigative journalism increase transparency greatly. It helps uncover corrupt officials and acts. The truth is what drives investigative journalism rather than just a story.
Investigative journalism poses a threat of being exposed towards anyone that is participating in corrupt acts. It is a risky job due to the fact that people being uncovered may have a lot of power. Workshops should be set up to train such journalist. Countries such as Uganda and Tanzania have just that. In a country like Colombia with all the guerilla forces and drug cartels, this is a very important part to investigative journalism. Journalist run the risk of being targeted, so they must be careful and smart in the ways they go about reporting and accessing their findings.
Lastly Columbia could search for outside help. Help can come from individual countries or organizations. Organizations such as the United Nations and the World Bank could offer guidelines to help. Both organizations are pretty much powerless but they can help establish treaties that could improve anti-corruption efforts. Individual countries that wish to invest in Columbia could also take initiative and further influence Columbian anti-corruption movements. To recap corruption is mostly if not solely negative towards Columbia’s economic development.
It makes Columbia look risky to outside investors hoping to make a Federal Direct Investment. Investors prefer stability rather than turmoil. Due to its geological position, Columbia has faced drug problems for a few decades now. In order to transport these drugs and grow them, bribery and corruption is needed. Columbian citizens and officials should notice that corruptions cons outweigh the pros when it comes to the Columbian economy as a whole. Officials must lead by example and the power of the executive branch should be reduced.