Colombia: Billions in Coronavirus Aid for Banks; Handouts for the Poor

RIO DE JANEIRO, BRAZIL – Opposition members in Colombia have strongly criticized what they regard as unjustified state transfers to banks and large companies during the ongoing pandemic caused by the novel coronavirus Sars-CoV-2. One of the government’s aid packages totals 500 billion pesos (around US$126 million) annually.

These transfers are part of the economic and social measures adopted by President Iván Duque since March in response to the health emergency caused by the economic impact of the Covid-19 pandemic.

Meanwhile, as a sign of protest, the people of the slums are hanging red cloths in their windows, to signal they are not receiving state aid, or that the aid they receive is insufficient. The 500 billion pesos is the compensation that banks will get for buying government bonds worth 9.4 trillion pesos. Duque had compelled the banks to make this purchase in order to secure his government’s liquidity during the Coronavirus crisis.

However, the 9.4 trillion pesos will be provided to the financial institutions by the Colombian Central Bank (Banco de la República) at zero interest. Thus, the state could have received the 9.4 trillion pesos directly from the Central Bank with no mediation by private banks, the opposition senators criticize.

Senator Jorge Robledo of the left-wing Democratic Pole party (Polo Democrático) criticized that Duque only arranged the mediation of financial institutions, which he now enriches with the annual yield of 500 billion pesos, as “a great gift” for them. This was not the only gift to the financial sector, Robledo said. In order for banks to be able to lend money to Colombians more easily in the crisis, the central bank has lowered the base interest rate from 4.25 to 3.75 percent.

However, 85 percent of banks have raised the interest rates on their loans, in some cases as much as 24 percent, according to both Robledo and Gustavo Bolívar of the Colombia Humana (Human Colombia) movement.

Nevertheless, many small and medium-sized entrepreneurs complain that they cannot access credit because, according to the banks, they are unable to provide collateral. The interest rates of Colombian banks are among the highest in the region. Their profits are disproportionately high, complained Robledo.

Bolívar also pointed out that two banks alone have collected approximately 3.5 billion pesos in remittances from the state to social causes such as the elderly and families in poverty during the isolation period.

Yet another of Duque’s decrees that has caused indignation concerns helping private pension funds by burdening the public pension system (Colpensiones). As a result, Colpensiones is now required to accept some 20,000 private pension clients and pay them a pension.

The private pension system and the Colombian banks belong to the richest families in the country. Among them is the family of Luis Carlos Sarmeinto Angulo, who, with a fortune of US$10.8 billion, ranks 189th on the Forbes list of the richest people in the world.

His holding company Grupo Aval controls two-thirds of Colombia’s banks. Grupo Aval is also involved in the Odebrecht corruption scandal. Sarmiento financed presidential campaigns for candidates of the traditional power parties. Aval financed almost 67 percent of Duque’s campaign.

The airline Avianca’s demand to be rescued by the state has also met sharp criticism. Avianca has not been a Colombian-owned company for many years and is under investigation for illegal wiretapping of its trade unionists. Nevertheless, the prospect of a state rescue package for Avianca is not yet off the table.

The Covid-related aid package for small farmers has also turned into a scandal. After Duque allocated 226 billion pesos to medium and small-scale farmers, the government land authority Finagro allocated 94 percent of the money to large producers against only four percent to medium and two percent to small-scale farmers, the administrative prosecutor’s office disclosed.

Meanwhile, among the middle and lower classes, existential concerns are increasing. Approximately half of the country’s labor force works in the informal or casual sector.

In the slums, many people are taking to the streets to demand state aid to fight hunger. In Bogotá, the city administration has reacted with repression by the police counterinsurgency unit (ESMAD).

Source: Amerika21