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Updated:5/17/01 |
| Remarks
by Ambassador Anne Patterson at the Overseas Security Advisory Council's
15th annual briefing, November 1, 2000 Remarks by Ambassador Anne Patterson at the Overseas Security Advisory Council's 15th annual briefing Department of State Versión en español I'm pleased to be with you today and to share my perspective on how the security situation in Colombia is affecting the business and investment climate; and how security concerns affect the welfare and well-being of American companies operating in Colombia today. I see from the OSAC membership list that many of your companies are working there. The United States is about to undertake an initiative unprecedented in this hemisphere. We have a heaven-sent opportunity to reduce the flow of narcotics trafficking to the United States. Coca production has never before been concentrated like it is now in southern Colombia, and we finally have the resources to attack all elements of drug trafficking at once. I want to talk more about this later and why I think it will lead to significant improvements in the business environment. As business representatives, you want to know two things about Colombia. First, can your company make money there? And if so, can it do so at reasonable risk to your personnel and facilities? The answer to the first question is almost certainly yes. I cannot answer the second question with any degree of certainty because there are a lot of unknowns involved in the implementation of Plan Colombia. But I will give you the clearest answers I can. I want to begin with an overview of economic conditions in Colombia, which are far more positive than portrayed in the media. I will then turn to what the United States is doing to support the Colombian Government's efforts to address the problems facing the country. And I will conclude with some thoughts on business security and corporate risk assessment.
BUSINESS ENVIRONMENT Colombia has long been a key site for U.S. business and investment. Currently there are about 120 U.S. firms operating in Colombia, with many more having some sort of affiliation. Total U.S. direct investment is about $8 billion, or about 11% of GDP. U.S. companies have created about 150,000 direct jobs, and about four times that many indirect ones. Our presence runs the full range from extractive industries such as Occidental in petroleum, and Drummond and Exxon in coal; to electric power generation such as KMR; industrial operations such as General Motors in autos and trucks; and Colgate-Palmolive and Frito-Lay in consumer products. American companies have a strong presence in information technology and telecommunications, such as IBM, AT&T and Bell South, as well as financial services providers such as BankBoston and Chubb. Colombia is the United States' twenty-fifth largest market worldwide, and the fifth in Latin America, after Mexico, Brazil, Argentina and Venezuela. The U.S. is Colombia's largest trading partner, selling about $4 billion there annually, or a 32% share of the US$10 billion Colombian import market. We are, by far, Colombia's most important export market for a variety of basic products such as coffee, sugar and coal as well as value-added products such as clothing and processed foods. There is good business news about Colombia today, and even better news about its future potential as a member of the world economic community. But such good news is rarely reported. And given Colombia's bad image, it's no surprise that American companies aren't inclined to come. The State Department Travel Advisory calls Colombia "one of the most dangerous countries in the world" and warns against unnecessary travel by U.S. citizens. The Advisory is intended to reach the broadest possible audience, without differentiating about trip purpose or itinerary. Not only tourists, but also business people pay attention. U.S. companies question whether it's worth the risk even to send an executive to close a deal, much less make an exploratory trip or consider a significant business or investment commitment. And opportunities had declined. After forty years of continuous economic growth, the longest such growth rate in Latin America, 1997 brought a severe recession that lasted through the end of 1999. The downturn brought business and investment paralysis. Fears about security, and particularly the availability of more attractive returns elsewhere (such as the booming U.S. stock market), exacerbated capital flight as assets were moved out of the country. But the Colombian Government reacted responsibly, agreeing to IMF recommendations, devaluing the peso, and undertaking the restructuring necessary in the financial sector. Economic indicators now suggest that the recession is over, and that economic and institutional reforms are in place. A return to modest GDP growth of around 3% is expected this year. The problem is that business and investment confidence remains weak, and unemployment is unacceptably high. Lack of concrete progress in the peace process, and continuing atrocities by guerillas, paramilitaries and just plain thugs, cause uncertainty in the business and investment climate. While the bad imagery is part of the truth, it is not the whole story. Equally valid is the day-to-day experience of many American companies that continue to operate in a fairly normal, business-as-usual way. It's unfortunate that the negative news sometimes has the unintended effect of rewarding terrorism by scaring off business. This hurts economic growth, causes unemployment and contributes to social suffering. The many experienced companies such as yours that are well-established in Colombia continue to affirm their long-term commitment to be there. U.S. firms are in fact making strategic investments in spite of Colombia's long history of problems. In May, for example, Bell South acquired an additional one-third stake in Celumovil, S.A., a leading wireless communication provider with 700,000 subscribers in eastern and northern Colombia. With Celumovil, Bell South subsequently acquired all of Cocelco, the leading provider of wireless communications in western Colombia. Together, the two deals were valued at nearly $700 million. Also in the dynamic telecommunications sector, U.S.-based Globaltron purchased a 75% share of Interloop in a transaction worth $100 million. Interloop is a major local force in the convergence of telephony and Internet services. If it makes good business sense to do something, good companies will find a way to make it happen, and will learn to cope with the risks, whether physical, institutional, or financial. Let's look at the longer-term environment. Both within the Latin American region and the world as a whole, Colombia ranks solidly in the middle of the group of industrializing countries that are rich in agricultural and mineral resources and have well-diversified manufacturing and consumer economies. Colombia has a stable democratic system with modern legislative and judicial processes; increasingly open trade and investment policy that encourages investment; a relatively consistent regulatory, tax and customs environment; and adequate modern infrastructure and telecommunications. Particularly important is its relatively well-educated, trainable labor force with its strong work ethic and high productivity. International companies see Colombia as one of the most competitive economies in the region. They see a business-friendly country that presents few risks regarding appropriation of assets, repatriation of profits and other important corporate concerns. The Colombian Government tries to support business, on security issues, through its law enforcement and military, within its limited resources. At this point, in my view, Colombia represents one of the great bargains of the hemisphere for American investors. Real estate is cheap. Businesses are for sale. The Colombian stock market is undervalued. Most importantly, there are many, many Colombians (trained, professional, and dedicated) with a wide range of experience that can be used by American firms. In other words, American firms have an opportunity to buy in close to the bottom and position themselves for what is almost certain to be one of Latin America's success stories.
PLAN COLOMBIA Well, what is the U.S. doing about Colombia? Where do we come in with Plan Colombia? And, most importantly to you, will heightened U.S. engagement and presence put at risk U.S. firms by raising the American profile? The U.S. Government is investing $1.3 billion, and this is a downpayment on a longer-term commitment, in Plan Colombia, a Colombian Government initiative which could reach as much as $7.5 billion. It is an integrated plan to reduce drug trafficking and to help build Colombian institutions. And a number of elements have come together which should make it successful. During the past five years, Colombia has become the center of the international cocaine trade, largely as a result of successful interdiction, eradication, and alternative development efforts in Peru and Bolivia. For those of you who are saying to yourselves that Colombia was always at the center of the cocaine trade, there are a few things that are different this time. For one, much of the world's coca is now grown in southern Colombia, instead of elsewhere in the Andes, and this cultivation is extremely concentrated, making it much more vulnerable. For another, ironically, the breakdown of the Cali and Medellin cartels opened up trafficking to smaller organizations. This has enabled guerrillas and other armed groups to get into the trade. And this is why the guerrillas are so much stronger now. The FARC and the ELN have been around in parts of Colombia for fifty years and represented no very serious threat. The new element is the extraordinary amount of money that they can draw on from drug trafficking. But it also means the trafficking organizations are smaller, less integrated, and more vulnerable than the mega-cartels of the past. Most importantly, with the Government of President Andres Pastrana, we have a government we can work with; a government with honest, dedicated officials who are committed to fighting drug trafficking and to bringing peace to Colombia. Those of you who saw President Pastrana on "Sixty Minutes" couldn't help but be impressed by his courage. With a supplemental in excess of $1 billion, the U.S. Government also has more resources at its disposal that it has had before. We simply could not let this production grow unchecked (and coca cultivation in Colombia grew over 22% last year) because it would eventually flood our streets with cheap drugs and swamp our treatment programs. International operations have always been the stepchild of our nation's counternarcotics policy, but, for once, we can contribute to the Colombian effort in a comprehensive way, attacking all elements at once. Aerial eradication of large-scale coca cultivation, under Plan Colombia, will continue and intensify during the dry season beginning in December. That effort will coincide with graduation from training of the Colombian Army's Second Counter-Narcotics Battalion and the arrival of the UH-1N helicopters. The two new counter-narcotics battalions will be deployed, with a headquarters battalion, to destroy drug laboratories, protect eradication missions, and disrupt drug trafficking activities. Even though these efforts are not yet underway, fighting in the south has intensified as the guerrillas have had to raise the costs of Plan Colombia. I would like to emphasize that support the U.S. is providing to Colombia is counter-narcotics support. U.S. military personnel in Colombia on any given day rarely exceed 300. Their role is training, equipping and providing intelligence to Colombian counter-narcotics forces. We have no military objective. And we do not believe the internal conflict in Colombia has a military solution. Support for the Colombian military and police comprises only one-eighth of anticipated funding for Plan Colombia from all sources. That assistance, which includes major funding for helicopters and helicopter support to the Colombian Armed Forces and CNP during the first two years of Plan Colombia, is important nonetheless in establishing conditions for success in the many other facets of Plan Colombia. U.S. funding is also being made available to spur alternative development, assist displaced persons, promote human rights, improve the capacity of local governments, support the peace process, eradicate illicit crops, and interdict narcotics bound for international markets. Funds are also being made available to Colombia's neighbors to help deal with dislocations that may result from concerted efforts to resolve Colombia's many mutually reinforcing problems. Funding to strengthen Colombian human rights institutions and organizations, and make municipal government more transparent and accountable are important aspects of U.S. support for Plan Colombia. These civic initiatives complement assistance to the peace process through U.S. funding for better evaluation of negotiation strategies with the FARC and the ELN. We share wholeheartedly the Colombian Government's belief that a viable peace process is key to achieving permanent peace.
BUSINESS SECURITY Obviously, our commitment to Plan Colombia, and to reduce income from narcotics, doesn't sit well with the bad actors. They criticize both us and the Plan in Marxist diatribes that don't fly with the Colombian population of forty million, who are sick of being intimidated in their own country by 20,000 outlaws. I want to be frank about real dangers and risks in Colombia. We have to acknowledge the potential for more terrorism and violence in the short term as drug traffickers, guerrillas and paramilitaries begin to feel the pressure from Plan Colombia. The guerrilla groups have repeatedly made statements against Plan Colombia. It makes sense to believe they would retaliate against the U.S. or U.S. companies in some manner. Colombians have told me they fear that if income from drug trafficking is reduced, guerrillas will increase kidnapping and extortion to maintain their revenues. Hopefully, that will not happen as the guerrillas and paramilitaries are weakened when their most important source of revenue dries up. American businesses must be as prepared as possible, however, to protect their facilities and people until the rule of law can be restored. Two major guerrilla groups, the FARC and the ELN, are making extortionist threats in the guise of a so-called "Law 002" in which they demand contributions from corporations and wealthy individuals. Or at least we think the guerrillas are making these threats because, often in Colombia, it is hard to distinguish between common criminals, paramilitary organizations, and the guerrillas. There are break-away groups, no longer under the control of the guerrillas, who are engaged in kidnapping and extortion. Regretably, nearly 100 Americans have been kidnapped in Colombia since 1980. Approximately 60% of those have been either dual nationals or expatriates who have lived in Colombia for some time, and who were simply in the wrong place at the wrong time. It was front page news when the FARC blew up the U.S. coal company Drummond's trains, took its Colombian workers hostage, and delivered extortion threats. International investor confidence was shaken when Drummond subsequently changed its mind about bidding on a major coal privatization project which now has gone at a bargain price to the remaining South African bidder. So it's not surprising that American companies are afraid they'll be the next target. Country managers are having to answer hard questions from their headquarters about the possibility of physical violence directed against employees and their families. So, what is the American business community in Colombia doing about this? And what is the Embassy's involvement? The business community, through its major organizations, the Colombian American Chamber of Commerce and the Council of American Enterprises in Bogota, Cali, Cartagena, Medellin, and Baranquilla, is heightening security awareness and capability. I, along with our Regional Security Officer, and our Commercial Counselor, are working with them closely. The Embassy receives a constant stream of visits from corporate security officers dispatched to check out the situation. We counsel each company to review its own security arrangements to assure that they are up to standard and provide advice on how to obtain expert help. We all want corporate security to be as good as it can be, and a number of actions have been identified. I have just come from a visit to Cali, Colombia's most beleaguered major city, where the Colombian-American Chamber of Commerce held its annual national congress. The business community there and the Embassy are in the process of developing an enhanced mutual assistance and security support network to share information quickly and efficiently on a country-wide basis. This is an important initiative, which should help give real-time information about ongoing threats. At the same time, the situation of every company is unique, as are the security requirements imposed by each corporate headquarters. Obviously companies operating in remote rural areas in oil production and electricity distribution have different risk profiles than a high tech company or financial institution with offices in the modern business center of Bogota, or a consumer products manufacturing plant with a large work force in suburban Cali. So, there's no intention of imposing a one-size-fits-all solution. And as our security officer is fond of saying, "security is not just a guy with a gun and an armored car. It's a whole system." I want to reiterate that we in the U.S. Embassy in Bogota are there to assist you in any way we can. Our Regional Security Officer and his assistants are world-class, as you would expect in a place like Bogota. We have a large contingent of law enforcement personnel, and our FBI agents assist the families of American citizens who have been kidnapped. We disseminate serious information about threats to the American community as quickly as we can. American companies get good cooperation from the Colombian Government. Plan Colombia will also help address some of these problems, including assisting the kidnapping task force and strengthening the investigative capabilities of the Attorney General's office and the police.
FUTURE BUSINESS CLIMATE Let me return to the business climate. Why is it important to support U.S. business in Colombia instead of encouraging them to go elsewhere? I've already mentioned the market potential for good mid- and long-term business opportunities in Colombia, as well as the country's positioning as a regional Andean and Caribbean hub. How soon will this potential be realized? First, I believe that Plan Colombia will be successful; it will materially contribute to a peaceful, prosperous Colombia. The guerrillas will come to the table and a peace process will be undertaken. I want to make clear - and I just finished three years as Ambassador in El Salvador - that the peace process, when it comes, will take a long time and be difficult and expensive. But two things will happen, just as they did in El Salvador. Colombians will return in much larger numbers than we now expect, and they will bring their money with them. Pent-up demand and business confidence will cause a boom, at least for the first couple of years. American companies will want to be there for the recovery. Moreover, there are structural elements that should benefit American firms. Colombia's exports-to-GDP ratio is one of the lowest in the hemisphere, lower than El Salvador and the Dominican Republic. For such a comparatively industrialized economy, Colombia's value-added export ratio is even lower. The government wants to double exports within three years. This means that Colombian companies need to modernize their production facilities and delivery systems. They will need technology, goods, and services. Since we're Colombia's biggest market, it seems appropriate that they acquire these things from us. We are have a new initiative called "Doble-Via" in which we work with the Colombian Government's export and investment promotion organizations to match Colombian companies with U.S. suppliers and partners to meet modernization needs. Colombia is making good progress in infrastructure development and in privatizing many former government operations. The government has taken the necessary reform measures and projects are moving forward in telecommunications, energy, water, transportation and environment. Colombia works with the International Monetary Fund, the World Bank and Inter-American Development Bank. The U.S. Trade and Development Agency, the U.S. Export Import Bank and the Overseas Private Investment Corporation are all open for business in Colombia and eager to expand their portfolios.
CORPORATE RISK ASSESSMENT So, in the formulas applied by corporate risk analysts, how does Colombia come out? Political risk, if defined as whether a country can sustain a democratically-elected government and governmental systems, this is not a serious concern in Colombia. Nor is the basic reliability of the judicial and regulatory systems affecting international commerce and finance. Economic risk, in and of itself, is considered predictable, with most indicators pointing to a sustainable, diverse pattern of growth, based on both primary resources and value-added production, with an increasingly important export sector, provided the peace process moves forward. Social risk in Colombia, as related to the well being of the population, is tied to security risk. However, social risk can also mean corporate risk if retail sales depend on prosperity, social confidence and comfort. Fear undermines this. In sum, in my opinion, corporate risk assessment in Colombia is really not about Government stability, national resources, business and investment opportunity, financial repatriation, or transparency. Nor is it about the good citizens of Colombia. The real, potential, and perceived risks are because drug traffickers and drug-rich guerrillas and paramilitaries can (and do) engage in criminal activity almost at will. The Colombian internal security forces are unable to stop them. With our help, the Government of Colombia will develop the capacity to exert its strength against these criminals so that Colombians can take possession of their own lives in their own country again. No realistic person expects this to happen overnight. It will take time; it will be difficult; and it may get worse before it gets better. But it is in the United States' interest and in the world's interest to help Colombia do this. In the final analysis, as in any situation, each corporation must be comfortable with its own business decision about whether to come to Colombia and whether to stay there. The United States Government cannot answer these questions for anyone. What the U.S. Government and the Embassy in Colombia can and will do is provide our best possible cooperation to help with your decisions. In closing, I would like to read you a quote from Franklin Roosevelt, written at the end of the great depression of the 1930's. His words are just as true in today's world at the beginning of a new century as they were then:
Thank you.
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