The Tipping Point

Ever since November 2019’s massive demonstrations against Duque’s proposed austerity measures against labor, tax, and pensions, Colombia has been approaching a tipping point. Social indicators paint a stark picture: over seventy-two thousand COVID-related deaths, more than half of the labor force in the informal sector, and four million unemployed (nearly 10 percent of the population). The peasant sector has been largely left to fend for its own amid the pandemic. Meanwhile, the peace process between the Colombian state and the Revolutionary Armed Forces of Colombia (FARC) is at risk of being undermined by increased state-sponsored paramilitarization.

The reform bill proposed by Duque, which seeks to shore up Colombia’s finances in response to the pandemic-induced fiscal crisis, is anti-worker. The centerpiece of the original bill is increased taxes on wages and consumption; Colombia’s capitalist oligarchy and other dominant classes are largely exempt. Worse still, the bill seeks to maintain the country’s sizable military budget, ensuring that any challenge to Colombia’s neoliberal model — based on concentrated land ownership and forced dispossession — will be met with increased violence.

The suspiciously named “Sustainable Solidarity Law” is essentially a bill asking for solidarity with Colombia’s ruling class. Proposed by the far-right pro–Álvaro Uribe bench of the current government, its stated goal is to provide solvency to crisis-ridden public finances while regaining the confidence of foreign investors and lenders.

The word “solidarity” is a euphemism, adapted from bills in Germany, France, Spain, and Italy, levying a temporary tax on large fortunes in the drive to reactivate post-pandemic economies. In Colombia, the law proposes a 1 percent wealth tax on fortunes of over 4.8 billion pesos (US$1.35 million) and 2 percent on those over fourteen billion pesos (US$4 million). But it also proposes to reduce corporate income tax, create green taxes to mitigate climate change (e.g., surtax on gasoline, diesel, biofuel and fuel alcohol, and taxes on plastic), and collect taxes from workers in the public or private sectors who earn more than ten million pesos per month (about US$2,765).

According to the Economic Commission for Latin America and the Caribbean, in Latin America, the richest 10 percent owns 71 percent of the wealth and pays only 5.4 percent in income tax. In Colombia, the richest 1 percent owns slightly more — and pays considerably less. Although the tax hike on large fortunes gives the bill a “progressive” patina, it is anything but.

In reality, the tax reform seeks to ensure that the rich contribute less by allowing them to deduct their wealth tax from their income tax, which in turn is set on meager marginal rates (elsewhere called the “marginal rate trick”). On the other hand, the tax is not applied to corporate profits, which would receive a round of tax reliefs.

But the most regressive aspect of the bill is the attempt to broaden the value-added tax (VAT) base on a number of basic consumer products such as eggs, coffee, and milk, and increase the VAT from 16 percent to 19 percent on the rates of energy, gas, water, sewage, and other public utilities.

According to official statistics, an average Colombian family needs about half a minimum monthly salary to cover food expenses and a little more than one legal minimum salary to cover other basic needs like transportation. Even so, this figure does not include costly health expenses, nor the debts incurred from the ICETEX, a state-sponsored entity responsible for privatizing education by financing student loans.

On balance, the Colombian government intends to solve its fiscal crisis by drawing the largest percentage (74 percent) of taxes from people considered “natural persons,” while companies would only contribute 25 percent.

Cash Transfer Populism

Even after caving to popular pressure in the streets, Duque continues to defend some version of the current bill. He has insisted it is the only way to reduce the country’s debt, increase revenues, and stabilize fiscal accounts while still maintaining social welfare programs.

The latter include Ingreso Solidario, a transfer program granting 160,000 pesos (less than US$45 per month) to five million Colombian households, support for low-income students to study in private schools and universities, and support for small- and medium-sized companies to pay social security for young people between the ages of eighteen and twenty-eight.

These programs, while seeking to reduce poverty and inequality, are part of a larger policy framework based on fiscal discipline and the reduction of basic social services. Rather than ensuring quality public services to better address the current health crisis, the government’s proposal is to maintain the neoliberal model for a concentrated minority while giving the Colombian people crumbs.

Duque’s current “post-pandemic solidarity reform” is actually a repackaged version of 2018’s “Economic Growth Law,” drafted according to the recommendations of the International Monetary Fund, the World Bank, and the mandates — still in force in Colombia — of the Washington Consensus: fiscal discipline, public spending cuts, financial liberalization, trade liberalization, foreign direct investment, and privatization of state-owned companies. This law sought to reactivate the economy and generate investor confidence following the regional slowdown experienced as a result of the fall in commodity prices in 2014.

The Duque government dictated austerity measures and cuts in public spending, reduced taxes for companies, and stimulated private lending. These measures resulted in GDP growth of 2.7 percent by the end of 2018, mostly reflecting the extraordinary increase in financial sector profits (eleven billion pesos in profits for the banking sector in 2019, with a profitability rate of 12 percent).

All the while, Colombians were becoming increasingly impoverished. The November 2019 protests were the result of that process, denouncing, among other things, lowered standards of living, a proposed pension reform, and the dismantling of labor laws. But even then, the current tax reform bill was a growing concern.

Following November protests, the Duque government tried to recover popularity with bread-and-circuses pandering: it announced a day of frenzied VAT-free shopping at the height of the pandemic, earning it the nickname “COVID Friday.” Thousands of people rushed to shopping malls and supermarkets, some of them using the Ingreso Solidario subsidy to buy tax-free products (all while increasing the sales of the big chain stores and supermarkets). But the effort to boost popular support ultimately failed.

“A Developed Economy by 2035”

There are several reasons why the Duque government is so obsessed with reducing the fiscal deficit and seeking new sources of revenue for poverty subsidy programs. On the one hand, Duque is keen to maintain his support among Colombia’s lower classes, with an eye to the upcoming 2022 presidential elections. But as former president Álvaro Uribe foresaw in his comments on the recent wave of protests, “the reform will hurt the party.”

On the other hand, Duque maintains an ideological, almost religious, attachment to the principles of neoclassical economics in which he was trained, according to which greater fiscal discipline and deficit reduction are necessary to ensure growth. He shares that ideological attachment with the group of Colombian “Chicago Boys” who advise the country’s economic and monetary policy. One of them, the creator of the current tax reform bill and now-former finance minister Alberto Carrasquilla, has announced he will step down from his post in the face of growing street protests.

Duque is no doubt also concerned that rating agencies like Fitch and Moody will downgrade the country’s score, limiting access to the foreign investment and international loans on which the country depends to finance a number of large infrastructure projects that were supposed to allow Colombia to become a “developed economy” by 2035.

According to the Global Competitiveness Report created at the Davos Agenda, Colombia ranks 104th in a list of 141 countries in terms of the quality of its infrastructure network. This in particular is why the Duque government intends to use a significant part of the public budget (3.3 billion pesos) to finance the works of the so-called Bicentennial Pact: a series of roads, known as “4 and 5g,” meant to improve the transportation of goods in different regions of Colombia. These infrastructure projects represent a potential gold mine for developers and international capital.

In addition to the contractors involved (including the Colombian tycoon Luis Carlos Sarmiento Angulo, one of the richest men in the world with a fortune close to USD$12 billion), the infrastructure projects would also benefit many of the nation’s oligopolies. For example, the sugar cane sector, the National Federation of Cattle Raisers, and the Business Group of Antioquia (which in turn controls the main supermarket chains and basic industries) would stand to benefit. The same applies for multinational companies currently operating in the country.

The Colombian Model of Accumulation

The current model of capitalist accumulation in Colombia was consolidated in the 1990s with the neoliberal program of economic liberalization. That agenda decentralized extractive royalties and reduced state participation in energy production and distribution, health and other basic social services, but maintained protectionist measures for the country’s oligarchic sectors.

Since then, Colombia’s accumulation model has been based on the exploitation of the urban classes through consumer goods, energy, and public services tariffs, which in turn is made possible by the exploitation of the countryside and the rural labor force: In Colombia, the peasant sector produces 70 percent of the food, but 1 percent of large rural properties concentrate 81 percent of the land. In other words, peasants and small rural producers occupy less than 5 percent of the total rural land and own on average less than two hectares of land.

As David Harvey has pointed out in his analysis of “accumulation by dispossession,” the expansion of capital in the neoliberal phase has been based on speculation, predation, fraud, and the theft of socially produced wealth. Although these dynamics are by no means exceptional to Colombia, the accumulation model there has been heavily titled toward the dispossession and displacement of thousands of people from their territories, including peasants, indigenous peoples, and Afro-Colombian populations. In their place, large agricultural properties are formed that receive tax incentives to produce palm oil, biofuels, animal concentrates and meat for export.

As part of this model, the Duque government allots a large part of the state budget to continuing Colombia’s internal war. The result of that conflict has been the internal displacement of nearly seven million persons (behind only Syria worldwide) and the killing of countless civilians. Military spending also allows it to maintain de facto control over populations that lack access to any state services.

In that respect, military counterinsurgency has played a key role in guaranteeing that oil companies and the landowning class (largely cattle ranchers) enjoy secure access in areas that remain under guerrilla control. Likewise, it is thanks to this counterinsurgency policy that the Colombian state continues to draw international financial support in the War on Drugs.

The System on Trial

Colombia’s current strike wave is also a response to the increasingly militaristic and authoritarian turn the country has taken under Duque. In addition to the assassination of indigenous governor Liliana Peña, from the coca-producing department of Cauca, protesters are denouncing the murder of more than eleven hundred peasants, union leaders, Afro-Colombians, and women since the signing of the Havana Peace Agreement between the state and the FARC guerrilla group in 2016.

Not only has Duque ignored that agreement, he has pursued a policy of extrajudicial killings under the “false positives” model implemented by Álvaro Uribe’s government in 2006, wherein murdered civilians are disguised as guerrillas and presented as “combat casualties.”

The popular revolt that gave rise to the February 1917 Revolution in Russia began under conditions similar to those in Colombia today: an autocratic and repressive regime with a fundamentally agrarian economy, a landed elite concentrating land under a feudal-style regime, and a working class gathered in the city, attracted by the growth of foreign capital industries. At the end of World War I, the Empire was plunged into crisis with widespread food shortages and famine. It was the repression of protests ordered by the czar, leading to the death of hundreds of demonstrators, that ignited the anger and indignation that resulted in revolution.

Behind Colombia’s repressive neoliberal regime lies an exploited peasant sector, concentrated agro-industrial properties, and an impoverished, informal, and often unemployed urban class that must pay for access to basic goods and services. With rising anger and no sign that the protests will subside, Colombia’s future is uncertain.

Protests are increasingly violent, with more than twenty people killed by riot squads in recent days, along with hundreds of arrests and several disappeared persons. Duque’s order for the army to repress the protests in Cali, the epicenter of the strike in the southwest, is a sign of things to come.

The protests have succeeded in getting the government to withdraw the tax reform law and announce the drafting of a new, allegedly less onerous bill. Although it would in principle exempt some of the most unpopular points, such as a VAT on basic foodstuffs and the tax on wages and pensions, these concessions no longer seem enough, and Colombians remain in the streets demanding more.

As the protests continue, more people are calling for the state to end its violence and repression of protesters, for the resignation of the defense minister, to scrap a health reform law that allows financial intermediation in the provision of health services, and to eliminate the privileges of banks, private enterprises, militias, and politicians, especially those embedded in the current governing elite.

Though it is too early to know how this will end, mounting anger against the government’s response to the economic and health crisis is bringing together the poor, health workers, students, peasants, indigenous, LGBT,  Afrocolombians, street venders, and informal workers. After three decades suffering under one of the world’s most violent neoliberal regimes, Colombians are starting to come together and trying to turn the tide.