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The Enormous Economic Cost of Colombia’s Protests

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One month after the beginning of the so-called national strike, promoted by leftist parties and unions, the economic losses of the protests in Colombia are estimated at 10 trillion pesos, close to 3 billion dollars.

This figure includes the cost of the destruction of public and private infrastructure, as well as the effects on productive activity due to the blockage of roads, which prevents the movement of inputs and finished products.

The worst situation is in the departments of Valle del Cauca and Cauca, located in southwestern Colombia. Valle de Cauca is an agro-industrial department, developed around sugar cane cultivation. Its capital is Cali, the third largest city in the country, after Bogotá and Medellín.

The department of Cauca is primarily agricultural, with a high percentage of indigenous people living in reservations. In both departments there is extensive cocaine cultivation and a large presence of heavily armed guerrilla and drug trafficking groups, whose participation in road blockades and attacks on the security forces has been evidenced.

protests in Colombia - El American
The blockades caused by the national strike have caused millions of dollars in economic losses and shortages throughout the country. (EFE)

According to the Business Pace Survey of the Chambers of Commerce of these departments, as a consequence of the strike and blockades, 26.9% of the companies have stopped operating and 63.3% are partially operating, with an average capacity utilization of 39.2%. Only 9.8% are fully operating.

In the departments of Valle del Cauca and Cauca, 52 % of the productive capacity is paralyzed, which translates into losses of more than one billion pesos per week, a little more than 350 million dollars.

The situation of the port of Buenaventura, through which 35% of imports and 32% of the country’s non-mining energy exports move, is particularly critical. As a result of the blockade of access roads, the port has been practically paralyzed since April 28, the day the violent protests in Colombia began, which has led to an accumulation of 500,000 tons of cargo in the maritime terminals.

Buenaventura receives products such as corn, wheat, soybeans, fertilizers, and all kinds of manufactured goods, pharmaceuticals, and technology products. A large part of the coffee and sugar exports go through Buenaventura and it is estimated that 16,900 tons of coffee, 20,400 tons of sugar and 60,000 tons of other goods have stopped being exported.

The paralysis of the port of Buenaventura is already affecting economic activity in other regions of the country. According to the National Federation of Traders of Antioquia, the traders of that department have accumulated losses of more than 500 billion pesos, about 150 million dollars. According to the trade association, commerce is already showing signs of shortage, which translates into price increases of many products, reported by 96% of the members of the association. Thirty percent of the merchants report having dismissed employees due to vandalism and blockades.

The blockades and vandalism of the protests are a hard blow to the reactivation of the economic activity that had been occurring as the restrictions imposed by the pandemic were reduced. In the first quarter of the year, the gross domestic product grew 1.1%, according to the National Administrative Department of Statistics (DANE), which predicted annual growth of more than 5%.

National Strike Committee refuses to budge

In view of this situation, the national government is trying to act on three fronts: i) to obtain approval of a new tax reform bill; ii) to negotiate with the so-called National Strike Committee; and iii) to lift the blockades, especially in the southwest of the country.

The approval of a tax reform much more limited in its collection objectives is, according to the government, absolutely necessary to rebalance the national finances and recover the confidence of the international financial markets, in which the Colombian debt has depreciated considerably, raising the costs of external financing. Standard & Poor’s has already downgraded the sovereign debt to speculative grade and has downgraded the rating of important companies in the country.

Negotiations with the National Strike Committee are only in the “exploratory phase” and although the government has already made a series of unilateral concessions – zero tuition in public universities, subsidies for youth employment, and subsidized credit for housing purchases – the promoters of the strike maintain the movement, including road blockades.

pérdidas económicas  protestas en Colombia
In the city of Cali, many citizens marched against the blockades and the violence generated during the protests in Colombia. (EFE)

Although the President gave the order to lift the blockades with the intervention of the Public Forces, this activity has become especially difficult due to the high number of points where the agitators are located and the ease of reestablishing the blockades after the withdrawal of the Public Forces.

According to the Minister of Defense, Diego Molano, there have been 2,229 blockades affecting 290 municipalities in the country, which is equivalent to more than a quarter of the total. In the midst of all the difficulties, a spontaneous reaction of the citizenry against vandalism and criminal blockades is already beginning to be registered.

On May 25 in Cali there was a large citizen’s protest to repudiate the blockades and the violence unleashed. In Medellin, Bucaramanga, Barranquilla, and other cities, citizens have taken to the streets to protest against the strike and demand from the government a more forceful action against its promoters. This movement is growing and several organizations are already preparing a great national day of rejection of the strike for June 19.

Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica

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