Selling fine coffee to the world, Colombia takes in a golden torrent of foreign exchange—$300 million in the first eight months of this year. As a result, Colombia should be solvent, sound and stable. Instead, after two years of political mismanagement of its income, Colombia is setting off economic alarm bells both at home and abroad. It owes the tradesmen of the world around $345 million, and has become the No. 1 collection headache for U.S. exporters. The debt has sapped the nation's credit, its currency and its reserves. "The Colombian economy," said a U.S. Government official whose business it is to know the country well, "is being wrecked as thoroughly as Perón wrecked the Argentine economy—and faster."
Colombia's President Gustavo Rojas Pinilla, unlike Perón, is bent on no zany program of economic change. He is a professional military officer thrown by the chance of a 1953 revolution into the strong-man leadership of the almost 13 million people of South America's third most populous country (after Brazil and Argentina). Preoccupied with the politics of staying in power, he failed to keep a sufficiently attentive eye on the economy. Now the figures add up to a mess (see chart).
Buying Spree. The mess is mainly the result of a reckless national buying spree. It began in mid-1954, when high coffee prices earned Colombia a record income. Then coffee prices fell. To curb the spree, the government put its faith in two major controls:
¶ Channeling incoming dollars through the central bank, which doled them out (at an artificially, cheap 2.5 pesos to a dollar) to importers.
¶ A licensing system that aimed at dividing imports into essentials and luxuries, and penalizing the luxuries with taxes.
The controls failed; the cutbacks on luxuries were offset by increases in essentials. The bank fell behind in supplying dollars. Exporters abroad, fearful of losing a fine long-range market, shrugged at their uncollected bills and continued to ship. Colombia's gold and foreign-exchange reserves began to fall.
Belatedly the government permitted a fraction of the incoming dollars to go into a free market, and forced importers of luxuries to buy them. It reclassified many essentials as luxuries. Growing demand for the free dollar drove it up from 3.75 pesos a year ago to 5.12 last week.
Missing Millions. As nearly as worried U.S. exporters could piece together the increasingly vague official figures, the amount of imports moved closer to the amount of exports. But Colombia's reserves, ominously, did not reflect the improvement; instead they dropped to a thin-ice $91 million, while the backlog kept growing.
What happened to the missing millions? New York banks and exporters put a big part of the blame on unreported government spending abroad. In particular, the pampered armed forces, Rojas Pinilla's main prop, are buying heavily, both of military hardware and of such luxuries as canned beer and TV sets, to be sold cheaply to soldiers.