The Costs of the War System and the Economic Predicament of Colombia

The specter of the increasing public debt in Colombia is expected to generate a deep economic crisis if not addressed.

Nazih Richani 11/1/2013

 

2087Colombian Soldiers (colombiareports.co)

For years the Colombian war system has grown economically unsustainable due to the unprecedented and uncontrollable expansion of its military force; as of now, the military is comprised of almost 500,000 personnel. The salaries, social security costs, health benefits, and future pensions of the military require an economic productive base much larger than what the Colombian economy can currently produce. This economic climate is a ticking bomb, which led the National Association of Financial Institutions (ANIF) to issue a stern warning that the public debt, actual and anticipated, could reach 290% of the gross domestic product (GDP), with 144% from pensions, and 97% from health benefits. What the report failed to underscore is that most of these future payments would stem from payments to the armed forces (police, military and security services), a sector that has expanded exponentially since the early 2000s as part of the war system dynamics.

The current public debt stands at 40% of the GDP—manageable in global standards, with that of the United States at about 106% of its GDP, and that of some countries of the Euro Zone at about 96% of their GDP. But, a more comparable and useful example is Greece, where its public debt reached 170.1% of its GDP in 2011, leading to an economic crisis that threatened the EU economic integration. Colombia is borrowing against its future without diversifying its economy, growing more dependent on the extractive sectors, few agribusinesses, and services, which would not be capable of paying the future bill. If ANIF estimates are accurate, then the war system dynamics, which have generated a bloated security apparatus, have assembled the elements of a perfect economic storm.

In light of the specter of the pension crisis looming in the horizon, the government of Juan Manuel Santos and its successors will have the daunting task of finding a solution without passing the costs to the most vulnerable sectors of the population. It has become imperative to put in place policies as soon as possible to avert the impending crisis. The first that comes to mind is to seek a peaceful settlement to the fifty-year civil war and to put an immediate freeze on the expansion of the military in order to start reducing it in size. A second is to revisit the privatization of public enterprises (e.g., Ecopetrol, Isagen), and instead, to find strategies to make them more profitable while still nationalized in order to cover the costs—including pension and health benefits—of its work force. The temptations to sell public enterprises are high given the dire need to fund public deficit, but to privatize is a shortsighted and ill-conceived policy that will not solve the problem. The state needs to generate more rents, and these aforementioned enterprises are profitable; consequently and contrary to the neo-liberal orthodoxy, the state needs to expand, rather than decrease, its productive public enterprises to make them accountable and transparent. A third strategy is for the Colombian state to reactivate the productive sectors, chiefly the rural economy, that could generate employment and surplus and in turn improve the state’s future finances. Finally, at the core of the above measures remains the task of reaching a peace agreement with the insurgency.

Stay tuned!

 


 

Nazih Richani is the Director of Latin American studies at Kean University. He blogs at nacla.org/blog/cuadernos-colombianos.

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