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Published On: Wed, Oct 9th, 2013

UN: ´Colombia`s urban rich poor gap worsening´

povertymatters

Colombia`s cities are Latin America`s most unequal, according the United Nations.

The UN claim Medellin is the city with the largest gap between the rich and poor, and that despite government claims to the contrary, the situation is worsening.

A report on urban equality in Latin America whose results were revealed yesterday, shows that inequality in Colombia`s urban centres grew by 15% between 1990 and 2010.  Worse still, inequality is growing faster in Colombia than in any other of the 18 Latin American countries studied by the UN.

To preview the report`s official launch, in an interview with the newspaper El Espectador, the report`s director Eduardo Lopez Moreno claimed, “Colombia is the only Latin American country where inequality is growing in all of its cities”.

Consecutive Colombian governments have heralded record economic expansion over the past decade, pointing to annual GDP growth figures north of 4 per cent. But Lopez Moreno claims this has been “in no way pro-poor”.

Lopez appears to propose Colombia change its economic model; something Colombia Politics has long argued for both in the TV studios and on this website.

Lopez claims Colombia`s economy is run by “monopolies”, “oligarchs” whose hands so tightly grip the levers of business that the poor (and let`s be honest, the middle class too) are kept out of the game. According to Lopez, Colombia`s  “markets work under the logic of hoarding or restricting (money and opportunities)”. In Medellin, he says, “the oligarchy continues to control the economy in the region, preventing wealth from reaching the poor.”

The comments seem to echo conclusions reached by Havard Professor, James Robinson in this year`s publication, “Another Hundred Years of Solitude” :

“Rich people in Colombia mostly make their money from monopolies in protected sectors that are created and shielded by the government”

Colombia Politics view

Robinson, like Lopez see Colombia`s economy as dysfunctional – almost pre-capitalist, even mercantile.

In this context any fight against poverty will fail. Colombia desperately needs to encourage the growth of more small and medium-sized businesses, to de-regulate and to establish a proper monopolies commission.

In private conversations accountants, politicians and small business owners have all told me that things are getting worse under the Santos administration. At the end of last year, the government introduced a new finance bill which reformed the tax code. All terribly boring stuff, but the key for many is that far from making things easier for the little guy – as we believe he should – Santos is rewarding the multi-nationals with cuts, at the expense of independent and start-ups on whom a greater tax burden has fallen.

Anecdotal perhaps, but it is an issue that unites many on the right with many on the left.  Over lunch with the high-profile left-winger, Senator Jorge Robledo, I asked the campaigning firebrand whether he thought the anti-market measures used by socialist governments across the Americas would work in Colombia. He laughed and said that if he were in power the first thing he would do would be to move Colombia towards capitalism. His argument is that there is no competition in the market, that it is run by “combos” (code for mafia). The monopolies and oligarchical figures that rule the roost mean Colombia must be seen as a “pre-modern” and “pre-capitalist” society, he asserts.

Robinson, you feel, would agree:

“The richest men in Colombia have monopolized different sectors—Carlos Ardila Lülle, soft drinks and sugar; Luis Carlos Sarmiento,banking and financial services; Julio Mario Santo Domingo, beer.”

There are many succesful businessmen and women in Colombia, there are plenty of start-ups and entrepreneurs. The time has come however, for real reform, real competition and real capitalism.

Under the current rules, “the poorest 10 per cent of Colombians pay 8 per cent of their income in taxes, the richest 10 per cent pay just 3 percent” (Robinson).

Step forward a pro-business pro-change presidential candidate.

Picture, The Guardian.

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  1. Andrew says:

    Colombia sits around 11 percent unemployment and I’m sure it is much higher among the youth. This coupled with those that have jobs are generally making the minimum or just above that regardless of their job or job sector. Labor is cheap. The poor can’t rise up and the rich increase their wealth because of dirt cheap labor.

  2. Joe Miller says:

    Why not? Inflation in itself isn’t as nearly as terrible as people make it out to be. What’s more, the poor have undoubtedly made significant gains over the course of the Bolivarian Revolution.

  3. Kevin Howlett says:

    Hi Peter, there`s nothing paradoxical in deregulating while at the same time constructing a monopolies commission. Red tape in Colombia can be a real challenge for many small businesses, and is at least part of the reason behind the problem of informality. A monopolies commission is essential.

    I`m not sure this is moment to talk about successes of the Bolivarian Revolution when inflation is running at plus 40%.

    Cheers

  4. Peter Bolton says:

    “Colombia desperately needs to encourage the growth of more small and medium-sized businesses, to de-regulate and to establish a proper monopolies commission.”

    What about worker cooperatives? That has been one of the greatest successes of the Bolivarian revolution in Venezuela. The vast majority of capitalist enterprises fail in their first year of operating and capitalism has tended toward monopolies, large conglomerates, oligarchy, falling wages and wild booms and busts in more developed countries like the United States. From Betsy Bowman and Bob Stone’s article in Dollar & Sense: “In mid-2006, the [Venezuelan] National Superintendence of Cooperatives (SUNACOOP) reported that it had registered over 108,000 co-ops representing over 1.5 million members. Since mid-2003, MINEP has provided free business and self-management training, helped workers turn troubled conventional enterprises into cooperatives, and extended credit for start-ups and buy-outs. The resulting movement has increasingly come to define the “Bolivarian Revolution,” the name Chávez has given to his efforts to reshape Venezuela’s economic and political structures.”

    It goes on to say: “While pre-Chávez co-ops were mostly credit unions, the “Bolivarian” ones are much more diverse: half are in the service sector, a third in production, with the rest divided among savings, housing, consumer, and other areas. Cooperativists work in four major sectors: 31% in commerce, restaurants, and hotels; 29% in transport, storage and communications; 18% in agriculture, hunting, and fishing; and 8.3% in industrial manufacture. Cooperativism is on the march in Venezuela on a scale and at a speed never before seen anywhere.”

    http://www.dollarsandsense.org/archives/2006/0706bowmanstone.html

    Also worth considering is that Colombia has an extremely weak labor movement with one of the lowest unionization rates in the world. Without a strong labor movement, those “small- and medium-sized [capitalist-style] businesses” will create low-wage jobs which therefore won’t actually help the problem of inequality and urban poverty that this the article seeks to address.

    As for deregulation, this tends to lead to a lower wage economy as it tilts the balance of power away from workers to the employee. Since the Thatcherite deregulation orgy of the 1980s, Britain has sunk to become one of the most unequal countries, and THE least upwardly mobile, in the developed world.

    Finally, saying that Colombia needs “to establish a proper monopolies commission” right after saying it needs to “deregulate” is something of a paradox as surely setting up a state anti-trust entity is itself a form of regulation.

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