VZCZCXYZ0004
RR RUEHWEB
DE RUEHBO #2558 1962217
ZNR UUUUU ZZH
R 142217Z JUL 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 3624
INFO RUEHCV/AMEMBASSY CARACAS 0722
RUEHLP/AMEMBASSY LA PAZ JUL LIMA 6378
RUEHQT/AMEMBASSY QUITO 7053
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS BOGOTA 002558
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN EIND ETRD
SUBJECT: ECONOMIC WOES OVERTAKE SECURITY ATOP COLOMBIANS'
LIST OF WORRIES
1. (U) SUMMARY. A plurality of Colombians now believe the
economy is the number one problem the country faces, more so
than security, according to a recent Gallup poll. While the
data undoubtedly reflect the perception of an improved
security situation (particularly in the wake of Operation
Jaque), they also show the growing unease associated with
increasing inflation and a slowing economy. END SUMMARY.
2. (U) In the poll of 1,000 residents of Bogota, Medellin,
Cali and Barranquilla (taken July 3-4), 44 percent of
Colombians ranked the economy as the principal problem, while
only 31.5 percent said security was the most pressing issue.
A similar poll in January, 2008 showed that only 26 percent
believed the economy was the dominant concern, while 54
percent considered security the country's chief problem.
--------------------------------------------- ---
PERCEPTIONS OF INFLATION AND UNEMPLOYMENT WORSEN
--------------------------------------------- ---
3. (U) According to the poll, 73 percent of Colombians
believe the situation surrounding their cost of living is
getting worse, up from 69 percent in April. The annualized
inflation rate for June jumped to 7.18 percent, well outside
the Central Bank's stated 2008 target of 3.5 - 4.5 percent.
4. (U) Similarly, 51 percent of Colombians believe the
unemployment situation is worsening, up from 49 percent in
April. Official figures suggest the unemployment rate has
been steady or declining over the last several months, but
clearly the public perceives otherwise.
5. (U) GDP growth dropped from 8.2 percent in 2007 to an
annual rate of 4.1 percent for the first quarter of 2008, and
most analysts predict a continued slowdown for the remainder
of 2008, with overall growth centering around 5%. Consumption
growth is down, as is consumer confidence, according to
official figures. Industrial growth for the first semester
of 2008 dropped to 1.9%, the lowest in several years.
6. (SBU) Finance Minister Zuluaga told visiting Ex-Im Vice
President John McAdam that the GOC was facing the
uncomfortable combination of an appreciating currency, higher
inflation and an economic slowdown. He considers combating
the strong peso the GOC's primary priority, a view not shared
by most financial analysts who see bringing inflation down as
the principal goal. The expectation is that the Bank will
raise rates at the upcoming July 25 meeting from 9.75% to
10%, further antagonizing Colombia's export sector. A senior
economic research company official -- who wished to remain
anonymous -- told us that Uribe administration efforts to
bring down interest rates in the face of worsening inflation
were "unsustainable."
--------------------------------------------- --------
MAJORITY STILL HAS FAITH IN GOC ECONOMIC TEAM AND FTA
--------------------------------------------- --------
6. (U) Despite the increasingly sour views on the economy, 56
percent of those polled approved of the way President Uribe
is handling the economy. Additionally, 51 percent approve of
the job the Central Bank is doing versus only 22 percent who
disapprove.
7. (U) Interestingly, despite the gloomy economic outlook,
the percentage of Colombians who approve of the free trade
agreement with the U.S. rose from 57 percent in April to 66
percent in July.
-------
COMMENT
-------
8. (SBU) The Gallup poll indicates that Colombians are
feeling the effects of the slowdown, and re-focussing on
pocketbook concerns as GOC successes on the political front
make them feel more secure. President Uribe still enjoys the
kind of stratospheric approval rating (85 percent) most
politicians only dream of. However, as more Colombians begin
to feel the pinch of increased inflation and unemployment, we
expect the economy to increasingly dominate public discourse
and play a significant role in the lead-up to the 2010
elections.
BROWNFIELD