Rebel attacks, US slowdown and lack of reform hitting Colombian economy.
The Central Bank sounded the alarm in a recent report, saying the prospects of an economic slowdown in the United States - Colombia's main export market - coupled with investor distrust in emerging markets were also causes for concern.
Under the terms of a 1999 $2.7 billion extended fund facility, the IMF has a set a target of 3.8% to 4% growth GDP for this year. The economy grew 2.80/0 last year, nowhere near enough to offset the effects of Colombia's worst ever recession in 1999 when GDP shrank 4.3%.
The National Planning Department has shrugged off concerns, estimating first quarter growth at 2.7%. But even if correct, private sector analysts say the quarterly growth rate will have to reach 4.5% by the fourth quarter to hit full year targets.
The bank's technical manager Jose Dario Uribe predicted the slowdown of the US economy could shave at least 0.5% off the growth target. He did not detail the likely impact of other factors.
The Central Bank also sounded a sharp warning about the upsurge in Marxist guerrilla attacks on the country's oil pipelines and power distribution networks. So far this year, the National Liberation Army has bombed the country's second largest oil export pipeline more than 80 times. The attacks have kept the 220,000 b/d pipeline out of action since February.
The sabotage campaign has forced Occidental Petroleum to virtually shut down production. Output is running at well below 10,000 b/d compared to current capacity of around 120,000 b/d.
The problems contributed to a 27% drop in crude export revenues in the first quarter of this year to $842 million. Colombia's total exports stood at $2.96 billion, down 4.9%, due largely to the drop in oil output.
"The problems of internal security could have a significant impact on the economy this year as one can see from the virtual paralysis of the Cano Limon field and its impact on oil exports," the Central Bank's report said.
"There is also a risk of an energy crisis given the continued terrorist attacks against the power distribution network," it added. The ELN has launched attacks on power pylons across the country, frequently causing blackouts lasting days in some areas.
Partly as a result of investor uncertainty about the attacks and a court ruling, the sale of a 76% stake in the state-owned 1,715MW Isagen generating company has been delayed indefinitely. The stake was valued at around $450 million.
In addition to guerrilla attacks and the US slowdown, unexpected increases in inflation are fueling worries that Colombia will fall short on its growth target. Inflation rose 1.15% in April compared to the same month last year - more than the 1% or less than the government had expected. The cumulative inflation figure for the first four months of the year stands at 5.69%, making it appear unlikely the government can hold inflation below the 8% target in the IMF accord.
Analysts warn that the government may be tempted to raise interest rates and reduce liquidity in the money markets if inflation shows signs of igniting. That would stifle growth for the remainder of the year.
The Central Bank did not mention two IMF-mandated economic reforms aimed at narrowing Colombia's deficit. Finance Minister Juan Manuel Santos has promised a reform of the social security and pension system and another reform cutting financial transfers from the central government to regional and municipal authorities.
Both reforms have run into stiff opposition in Congress, where President Andres Pastrana's Great Alliance coalition has no clear majority. Outside Congress the reforms face stiff opposition from unions, making smooth passage far from certain.
The measures are key if Colombia is to reduce its deficit and meet its IMF growth target of 4.5% for next year.
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|Article Type:||Brief Article|
|Date:||May 17, 2001|
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