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How Market-Friendly is Alvaro Uribe?

by Andres Mejia-Vergnaud *

18.05.06 | According to polls, Alvaro Uribe has a great chance to be re-elected as President of Colombia. Of course, anything can happen in politics, but these polls reflect a solid trend. Taking into account the current Latin American context, it is interesting to examine how close is Uribe to the ideas of open markets, trade, private property and macroeconomic stability.

We must start by remembering that, in politics, choices are made between actually available options. Friends of free markets can wait forever for their ideal candidate to appear. This might never happen, and in the meantime, candidates with radical views against markets will fill the vacuum

We must also remember what Latin America is facing right now. This is not just another wave of populism. The view of Chavez, now adopted by Evo Morales, and by several candidates in the region, is a radical rejection of capitalism and free-markets, which results in actual policies aimed at establishing a new brand of socialist authoritarianism.

Perhaps the best way to understand Uribe’s stance towards markets and capitalism are the words that a good friend of mine, now a government official, said to me in 2002, when Uribe was elected president: “he thinks like a businessman”. In spite of the fact that he spent most of his life in professional politics, Uribe thinks like a good and paternalistic businessman. Roughly, this means that he cares for his workers, because he cares for his business.

The bright side of this is that Uribe is close to many of the institutions that sustain a market economy. He’s a friend of private property. He’s also a friend of free enterprise, and envisions a country of thriving small entrepreneurs. He favors foreign investment, and many of his policies have been targeted at attracting more investors. He’s also an enemy of bureaucracy and high government spending. Truly, an effort still needs to be done to reduce spending at the central level of government, but this is not easy, since the source for much of this over-spending comes from the Constitution itself, or from activist judges. And Uribe can be credited for re-shaping many agencies of government in order to make them more efficient, results-oriented and less bureaucratic.

Uribe is a friend of free trade too, although his view of international trade is not totally consistent with the free-market view of the gains from trade. But that would be too much to ask in a politician. To Uribe, free trade agreements are good because they open markets to Colombian exports, which in turn will cause entrepreneurs to find new opportunities, hire new workers, offer better jobs and wages, etc.

But the dark side of this businessman approach is visible in two aspects: first, Uribe sees himself as the manager of the nation. Second, he believes in actively helping business: apparently, his view of free enterprise is one where government is a friend of business, open to their concerns, and ready to give them a hand. This is not cronyism: it’s a sincere belief that this is the best way to promote development. Unfortunately, these two aspects put Uribe away from some market-friendly concepts.

Viewing himself as the manager of the nation means that he gets involved in practically every aspect of public policy. Unfortunately, sound economic policy is not about directly fixing problems: it’s about creating conditions. Knowledge is highly decentralized in an economy, and so decisions must be equally decentralized.

Second, he’s very open to the concerns of business associations, or regional groups, that sometimes demand for privileges that have a high cost to the economy. As a result of this view, certain agricultural markets got highly protected during the first part of his administration. This meant more expensive food, but also meant that resources were misdirected to uncompetitive activities. Then in 2004, in the face of the cries and pleas from business associations, Uribe reacted irrationally to the appreciation of the peso against the dollar. He imposed capital controls, and appointed his Minister of Agriculture Carlos Gustavo Cano, a protectionist, ultra-conservative and vocal enemy of trade, to the board of directors of the central bank. In addition, with the purpose of helping business, the Colombian tax system is now full of what Uribe calls “little exemptions”, that make our tax system look like a strainer, and create pressures to elevate rates.

In spite of this “dark side”, I have no doubt that Uribe is the more market-friendly political leader in Latin America. Unlike the Chavez bunch, he understands that private enterprise, investment and trade are the driving forces of an economy. He has appointed some of the most market-friendly Colombian economists to high positions in government, which caused that, in balance, the bright side has prevailed. And we must not forget that Uribe clearly understands one of the basic principles for the operation of any free-market: the role of the government is to guarantee security. He has worked heavily on this, and the result is a growing economy, built on growing investment and consumption, helped by growing confidence.

* Andrés Mejía-Vergnaud is the Executive Director of the Instituto Libertad y Progreso, Bogota, Colombia.

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