Colombia: Is There a Light at the End of the Tunnel? (A)

23 Pages Posted: 21 Oct 2008

See all articles by Melissa M. Appleyard

Melissa M. Appleyard

Portland State University - Management

Carlos Zuleta

affiliation not provided to SSRN

Abstract

This case series is intended for use in courses covering the political economy and the process of economic reform (see also the B case, UVA-BP-0412). It transports students to the tumultuous shores of Colombia. Students must grapple with the paradox that the Colombian economy was a shining star in Latin America according to a number of measures although the country was perched on an unstable political foundation. The (A) case permits an examination of the economic reform process in a Latin American context. By the mid-1990s, economic reforms transitioned the Colombian economy from being inwardly focused to being integrated into the global economy, the so-called Apertura Economica. The macroeconomic, microeconomic, and institutional reforms toward this end are examined in detail. The relative economic stability analyzed in the (A) case gives way to economic hardship in the (B) case when the unstable political situation surges to the fore. The social strife caused by interest groups that have perpetuated civil war and relied on the drug trade to finance their positions becomes a formidable challenge by the close of the 20th century.

Excerpt

UVA-BP-0411

COLOMBIA: IS THERE A LIGHT AT THE END OF THE TUNNEL? (A)

As Juan Manuel Galán stood on top of an improvised stage the day of his father's funeral, Colombians watched with a mixture of rage and indignation. Two days before, on August 18, 1989, presidential candidate Luis Carlos Galán had been gunned down during a political rally in the town of Soacha near Bogotá. Juan Manuel was only 18 years old at the time, and many say that he elected Colombia's next president that day by saying, “I wish for my father's ideals to be carried on by Mr. César Gaviria.” The following March, Gaviria was elected Colombia's president by one of the biggest victory margins ever. In his inaugural speech, he announced a series of deep economic and political reforms, and he concluded by saying, “My fellow Colombians, welcome to the future!”

The hallmark of Gaviria's presidency was reform. He carried through his intention of preparing the country to face the inevitable trend of globalization and economic integration. There were reforms at the institutional, macroeconomic, and microeconomic level. There were also deep political reforms, and the most prominent symbol of this was the country's new Constitution of 1991 that replaced the one that had been in place since 1886.

As the reforms were taking place, there were questions raised about their depth, scope and timing. There were also many questions regarding whether these changes would help Colombia become a more competitive country at the international level while at the same time maintaining its traditional economic stability. There were those who argued that the reforms were imposed by outside influences and the country really did not need the deep transformations that were about to take place. Soon after Gaviria's inauguration there was a general sense of hope, but many still wondered if he would in fact be able to carry Colombia “to the future.”

A Look Back in History

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Keywords: political risk analysis

Suggested Citation

Appleyard, Melissa M. and Zuleta, Carlos, Colombia: Is There a Light at the End of the Tunnel? (A). Darden Case No. UVA-BP-0411, Available at SSRN: https://ssrn.com/abstract=907912

Melissa M. Appleyard (Contact Author)

Portland State University - Management ( email )

United States

Carlos Zuleta

affiliation not provided to SSRN

No Address Available

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