Colombia’s Second Lost Decade

A few months ago, the following article - Latin America's Second Lost Decade - was published and republished in several international news media. As you read the article, you see some silver lining ...that maybe but maybe that the 2019-2022 final stretch would save the decade.

I am rather optimistic (normally) but unless you address the fundamentals you keep on fixing or building on crumbling infrastructure. I focus a lot on Latin America and more specifically Colombia for the following reason: Uncertainty Over the Future - Whatever the future holds, we should all keep an eye on the fate of this region. Not only does Latin America’s population rise beyond 600 million people but it also provides a testing ground for policies that may serve the entire developing world, and its collaboration will be indispensable towards defeating climate change.

While the world and our ill-informed politicians (populist) continue to do the wrong things to address the immediate, we need to think Pre (post) Pandemic. It will end but meanwhile where should we focus our efforts; the poorest, the oldest, the banks, Big Businesses, SMEs, education, health, etc! All are valid but we know that the debt bubble is what is about to implode unless we come up with the repayment plan - This should be a Pay-It-Forward plan, not a knee jerk reaction to put another finger in the dam!

Our motto should be - No Help Without Compromise! Be it the private sector, SMEs, - solidarity is key! I am not talking about socialism but strategic capitalism or whatever you want to call it.

We can't go back to the same normal ...whenever we get there but unless we write the New Rules of Engagement, it will take a long time for things to change.

The Colombian government took their first stab at trying to fix the economic and social problem by raping the States/Province/Territories pension fund (Decreto 444). I am too fond of the following picture but this is the perspective that Colombians have about this first ill-informed decision. Money will be used to find banks to lend money at market rates using the pension savings of Colombians. Some money will most likely be a lifeline for Avianca (Colombia's National Airline) who has shown to be less than prudent with their investors money - should we expect a different behaviors?

The other great portion of the money will be used by private healthcare providers (that could have gone to market). Close to 58% of Colombians depend on a crumbling public healthcare system. It's important to note that the government did not consult with mayors and governors affected by the raping of the pension fund (FONPET).

Three days into a full national confining (stay home) national policies, the jails have already started a national mutiny. Colombia's proposal now is to release a portion of the prisoners (MáS DE 8.000 PRESOS SALDRáN DE LAS CáRCELES) but, as we know, back into their communities without employment, savings, and/or support network. I sure do not want to be a pessimist but without food, housing, and/or access to credit this particular population will resort to what they know best!

Colombia's elected officials (not only this government) have a high default rate on past promises, agreements, and negotiations with their citizens. While we are not privy to the details of the loan, the repayment schemes is due to begin in 2040 - far after this government's time in office.

So ....for the past seven years, we hav been promoting the need to close the Knowledge and Policy Gap when it comes to Innovative Finance. Not unique to Colombia, the region is home to social innovation like I have never seen before.....but the great majority hope that the flows of Official Development Assistance will continue and that some White Saviour will appear with all the money in the world.

Here is a great example from Mister Buffet - Howard Buffett donates $200 million to rid Colombia of cocaine! What? Really ..it's billions of dollars from the USA over decades and well things have accelerated instead of slowing down. The best example is the somewhat recent end of conflict with one paramilitary group (aka Peace Accord). Coca production (NB that coca doesn't equal cocaine has most Americans consume it on a daily basis in their Coca Cola) has grown exponentially since the singing of the Peace Accord.

Ok back to Mister Buffet welcomed $200 million (and even more now) or maybe this will change as these are not obligations. The point that I am trying to make here is that it takes a village to raise a child ...or in this case to get sustainable impact. I do not want to generalize but this is the wrong way to go about this - don't give money please unless it comes with compromise. Mr Buffet let me give you an example - during some consultations in Colombia where donors have been so generous with their money by helping build infrastructures - most mayors are saying ...thank you but we do not have a budget to maintain them!

So ...what we are putting forward is the need to implement Innovative Finance solutions. Colombia has a healthy financial system and, through incentives and sound public policies this government can implement solutions to scale. We have brought a proposal forward that is guided by global expertise and experience. Time will tell but meanwhile let's fix the Damn Dam!