Cablegate: S/P Director Gordon Discusses Colombia's Economic

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SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PHUM PGOV KJUS CO ECIN ECON
SUBJECT: S/P DIRECTOR GORDON DISCUSSES COLOMBIA'S ECONOMIC
OUTLOOK AND CHALLENGES

REF: BOGOTA 2855

1. (SBU) Summary: Finance Minister Oscar Ivan Zuluaga told
Director of Policy Planning Dr. David Gordon on July 23 that
the long-term outlook for the Colombian economy remains
strong despite turmoil in international markets, rising
inflation, and appreciation of the peso. He pointed to
energy, infrastructure, and agriculture sectors as prime
investment opportunities. Zuluaga pressed for conclusion of
the U.S.-Colombia Trade Promotion Agreement (CTPA) as an
important step to promoting investment, increasing
competitiveness, and reducing poverty in Colombia. In
separate meetings with the business community in Bogota and
Medellin, private sector leaders expressed support for
President Uribe's security and economic policies but had
mixed views on his bid for a third term. Gordon urged the GOC
to look at increasing economic relations with Asia and other
emerging markets as a means for further investment in
Colombia. He also urged regional cooperation with
like-minded countries on security and
counter-narcotrafficking efforts. Gordon added that
public-private partnerships on infrastructure projects and
education programs would also increase the effectiveness and
impact of these efforts. End Summary.

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Minister of Finance: Strong Economic Outlook
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2. (SBU) In a private meeting following the bilateral Policy
Planning dialogue on July 23 (reftel), Finance Minister Oscar
Ivan Zuluaga told Director of Policy Planning Dr. David
Gordon that, despite current turmoil in international
markets, rising inflation, and the steep appreciation of the
Colombian Peso, the long-term outlook for the Colombian
economy remains strong. Zuluaga highlighted the improved
security situation and economic liberalization under
President Uribe,s administration as key to Colombia,s
strong economic performance in recent years. He acknowledged
that Colombia was navigating a difficult course between
rising inflation and currency appreciation, but expressed
confidence that Colombia offered many opportunities for
continued long-term growth. Zuluaga identified the energy,
infrastructure, and agriculture sectors as prime investment
opportunities. He cited the post-Uribe political outlook as
the top risk to the economy, insisting that strong leadership
must continue to make economic reforms and security gains
permanent. Zuluaga also emphasized that conclusion of the
U.S.-Colombia Trade Promotion Agreement (CTPA) was extremely
important to promoting investment, increasing competitiveness
and building a solid foundation for job creation and poverty
reduction in Colombia.

3. (SBU) Gordon reiterated that the USG remains fully
committed to achieving approval of the CTPA and understood
the political and economic implications of continued delay.
Gordon characterized Colombia as positioned at a moment of
great economic opportunity as a result of security gains, its
resource base, and the strength of its democratic and
economic institutions. He identified Colombia and Brazil as
the best positioned countries in South America to take
advantage of developments in the world economy. Gordon urged
the GOC to look at increasing economic relations with Asia
and other emerging markets as a means for further raising
investment in Colombia. He also encouraged Colombia to look
at sectors such as hydroelectric generation as growth
opportunities. Gordon concluded by noting the positive cycle
that Colombia was currently in had the potential to feed more
positive growth as long as the GOC remained committed to the
Uribe Administration,s successful democratic security and
economic liberalization policies over the long-term.

--------------------------------------------- ---------
Private Sector Bullish; Need Infrastructure Investment
--------------------------------------------- ---------

4. (SBU) At separate meetings in Bogota and Medellin,
business leaders explained that strong institutions and
increased security have bolstered a stronger private sector.

Now, expanding competitiveness through
infrastructure-building in ports, railroads, highways, and
hydroelectric plants emerged as new necessities. They urged
joint ventures in oil, gas, mining, and services sectors,
along with a new outlook on biofuels. Politically,
Colombia's successes are America's successes and should be
publicized in that context, especially noting that Colombia
remains a strong ally in a region that faces threats to
democracy and stability from Venezuela, Bolivia, and Ecuador.

5. (U) Business leaders noted the need to increase
productivity, science and technology projects, and focus on
long term growth for sustainability. Corporate social
responsibility is already a major focus among firms, and they
want to see more investment towards education programs,
including the Fulbright scholarships. They claimed there were
more Cuban than American professors teaching at public
universities in Colombia--a serious disadvantage for training
future leaders. Colombia's flexible labor regulations, low
corruption, strong arbitration, rule of law, security, tax
incentives (greatest in the hemisphere), and human resources
all contribute to favorable conditions for foreign
investment.

--------------------------------------------- -
Uribe Popular but Reelection Bad for Democracy
--------------------------------------------- -

6. (SBU) Despite President Uribe's high approval ratings in
the country and within the business community, participants
at the roundtable were mixed on a potential third term.
Concerns remain about who could succeed Uribe and continue
his pro-security, pro-business policies, especially given
Colombia's history of having a "pendulum effect" of good
presidents followed by bad ones. The head of a large mining
concern queried whether the societal consensus that Uribe had
generated in favor of democratic, private sector-led growth
was firm enough to survive his departure in two years' time.
Luis Carlos Villegas, an Uribe ally and President of
Colombia's largest business association (ANDI), offered the
opposing view, stating that changing the constitution for a
third term reelection would be damaging for democracy and
institution-building. He was on public record as opposing a
third term, and believed ultimately Uribe would not run.

7. (U) In response to questions about U.S. views of Colombia,
Gordon emphasized the strong bipartisan support and
partnership through Plan Colombia. Colombia--along with
Brazil, Mexico, and Chile--could be strong political and
economic anchors in the region, and share experiences on
security and counter-narcotrafficking efforts. Public-private
partnerships would benefit infrastructure projects and
education programs. He also encouraged business leaders to
focus on balancing social inclusion with economic growth.

8. (U) S/P staff has cleared this message.
BROWNFIELD

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