Colombia's Drop in Violence Draws Back Exiles,
Boosts Economy

Dec. 17 (Bloomberg) -- Juan Manuel Linares, 35, says he returned to Colombia last year because the risk of kidnapping that drove him to seek refuge in the U.S. in 2000 had diminished.

Colombians are going back to their homeland after President Alvaro Uribe's 28-month crackdown on insurgents and drug traffickers reduced the number of kidnappings by more than a third in Latin America's most violent nation.

Improved security has encouraged Colombians to invest more at home, boosting economic growth. The country's stocks have more than doubled this year; the peso is the second-biggest gainer against the dollar among 60 currencies tracked by Bloomberg.

``Uribe has definitely been a president who has made it easier for many Colombians to make the decision to return,'' says Linares, a university administrator at the Universidad Los Libertadores in Bogota, whose sister was kidnapped in 1999 and released almost a year later.

Since taking office in August 2002, Uribe, 52, has lowered the number of kidnappings 38 percent and homicides by 19 percent from the 28 months immediately preceding his term. He has also prompted almost 9,000 guerrillas and paramilitary fighters to surrender, the Defense Ministry says.

``Businesspeople and middle-class people who had left for reasons of security are returning,'' says Ana Padilla, head of immigration police at Bogota's El Dorado International Airport. ``Uribe's government is generating improved security and a stronger economy, and they are bringing in their money.''


Entering Country

In the first 11 months of this year, 1.1 million Colombians entered the country, more than in any January-November period since at least 1998, according to immigration police figures. The statistics don't differentiate between Colombians who live abroad and those who reside in their homeland.

Declining violence has encouraged Colombians and foreigners to invest more in the country.

Domestic investment, which includes corporate and government spending on factories, highways and schools, rose 18 percent in the second quarter from a year earlier. International direct investment in Colombian companies or Colombian units of multinational corporations surged 65 percent to $851 million in the same period, government figures show.

New York-based Altria Group Inc. unit Philip Morris International Inc., Irving, Texas-based Exxon Mobil Corp., Rio de Janeiro-based Petroleo Brasileiro SA, and Glencore International AG, a commodity trading firm based in Baar, Switzerland, are among companies that have announced new investments in Colombia this year.


Philip Morris

Philip Morris plans to spend as much as $310 million to buy cigarette maker Cia Colombiana de Tabaco SA, one of the biggest acquisitions by a multinational company in a decade.

``Colombia is at a turning point in its history from a political and economic standpoint,'' says Luc Gerard, managing director of Philip Morris Colombia SA. ``It's the right time to come in.''

Growth of the $91 billion economy, the fourth-biggest in South America, will be from 3.5 percent to 4 percent this year and may be similar in 2005, Jose Dario Uribe, 45, who takes over as central bank managing director in January, said on Dec. 7. Last year, gross domestic product grew 3.9 percent, the fastest since 1995.

``Improved security is helping to promote a growing economy,'' says John Ditierri, who manages $9 billion in emerging- market stocks, including about $100 million in Colombian equities, at Emerging Markets Investor Corp. in Arlington, Virginia. ``Colombians feel they have turned a corner, that they finally have a leader who has turned a corner.''


Leaving Miami

Angela Coccaro, 27, returned to Bogota, the capital, in November after living for 10 years in Miami, which is home to about 300,000 Colombians. Coccaro, who helped produce the film ``Maria, Full of Grace,'' which won the Audience Award for best dramatic film at the Sundance Film Festival this year, says the improvement in the security situation in Colombia was key to her decision to return.

Coccaro, who this year became a U.S. citizen, says she wants to take advantage of her cross-cultural ties to develop her career as the Colombian movie industry grows.

``You can feel that common crime has dropped a lot in the cities,'' says Coccaro, who recalled the early 1990s, when the nation's cities were ravaged by bombings initiated by drug traffickers.

President Uribe, who has survived more than 18 assassination attempts, says Colombia still has far to go in its campaign against violence. There were 2,200 kidnappings in the country last year, the most in the world.

``We have made progress, but the serpent is still alive,'' Uribe told a news conference after a Nov. 22 meeting with U.S. President George W. Bush in the Caribbean city of Cartagena.


Remittances

Remittances by Colombian nationals to their homeland will increase about 50 percent this year to $4.5 billion, said an Inter-American Development Bank study released on Sept. 7. Last year, such transfers totaled about $3 billion, making the country the third-largest recipient of remittances in Latin America after Mexico and Brazil, according to central bank figures.

Some funds are destined for investment and some will be used by Colombians returning to reestablish their homes, says Jorge Londono, president of Bancolombia SA, the country's largest bank.

From Jan. 1 to Nov. 30, Medellin-based Bancolombia received $137 million in transfers from abroad compared with $74 million a year earlier.

``There is an array of factors: returning Colombians, Colombian investment returning and increasing market share,'' Londono says.

Increased remittances from abroad have pushed up the peso, which has gained 18 percent this year to 2,358 per dollar.


Stocks, Bonds

The Colombia Stock Exchange Index has gained 108 percent in dollar terms this year while the government's 15 percent benchmark peso bond due in 2012 has risen 6 percent, reducing its yield to 12.78 percent.

``President Uribe's firm leadership and the significant support he has among the population have been key drivers of the favorable performance by Colombian bonds this year,'' says Mohamed El-Erian, who manages $14 billion of emerging market debt for Newport Beach, California-based Pacific Investment Management Co.

To slow the inflow of capital into its stock and fixed- income markets, the government said on Dec. 14 that investors must keep their money in the country for at least a year.

Uribe, whose father was killed in a botched kidnapping attempt by guerrillas in 1983, had an approval rating of 67 percent in September compared with 75 percent in June, according to Gallup Colombia, a polling company, in a survey that had a 3 percent margin of error.

Congress on Dec. 1 approved a constitutional amendment that would allow Uribe to run for a second consecutive term in 2006.


Election Promises

Elected on promises to take a firm hand with guerrillas and anti-insurgent paramilitary fighters. Uribe has boosted the number of soldiers and officers in the armed forces and police to about 350,000 from 280,000 before he took office.

He also reduced land under coca cultivation to 86,000 hectares (212,000 acres) by the end of 2003 from 102,000 hectares a year earlier, according to United Nations' figures. Colombia produces 80 percent of the world's cocaine, which is extracted from coca leaves.

Colombia received about $680 million in U.S. aid in the 12 months ended Sept. 30 to fight drug trafficking and drug-funded insurgents and paramilitary forces. Colombia's four-decade guerrilla war and related criminal violence cost the economy as much as 3 percentage points of lost growth a year, according to government studies.

Uribe's campaign has made it safer for Colombians to travel and transport goods around the country. Traffic on the most heavily traveled routes over long holiday weekends increased 142 percent last year from 2002, according to tourism and police figures compiled by Uribe's office.


Travel

``Uribe has guaranteed that people can travel,'' says Linares in the university's boardroom. ``Security problems continue, but the situation of the country has improved a lot.''

Retail car sales rose 17 percent to 90,130 vehicles in the first 10 months of the year, compared with a year earlier, according to Econometria SA, a Bogota-based company that monitors auto production, imports and sales.

The increase is partly due to purchases by Colombians returning from abroad to set up home, says Lazaro Montes, 64, the managing director of Hyundai Colombia Automotriz SA, which imports vehicles made by South Korea's Hyundai Motor Co.

``We see them in our sales department,'' says Montes, who fled the country for several months after being kidnapped and then released by guerrillas in 1999. ``Those who come back, the first thing they do is buy a car.''

To contact the reporter on this story:
Robert Willis in Bogota at Ext. 234 or bwillis@bloomberg.net

Last Updated: December 17, 2004 00:14 EST