COLOMBIA: ECONOMY IN CRISIS

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• published: 21 Jul 2015
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Spanish/Nat Colombian President Andres Pastrana has declared an economic emergency to stem banking losses. The measure includes a one-point-six (b) billion U-S dollar bailout for the country's ailing banking system which has already lost 63-point-two (m) million U-S dollars. President Pastrana said the measures would protect small depositors and stave off a more serious financial crisis. The Colombian economy is in crisis. On Monday night President Andres Pastrana declared a state of economic emergency in response to huge banking losses, soaring interest rates and unemployment, as well as widespread defaults on loans. Banks have incurred losses of 63-point-two (m) million U-S dollars in the first ten months of this year alone. The economic emergency includes plans for a one-point-six (b) billion dollar bailout to rescue the banking system. In an address broadcast to the nation, Pastrana said this and other measures would protect small depositors and prevent a more catastrophic financial crisis. SOUNDBITE: (Spanish) "The experience other countries have been through shows that if we don't act immediately to avoid greater deterioration and to take the pressure off those in debt, the financial crisis could become a catastrophe. And the country could suffer, as a result, a complete paralysis, similar to being hit by a hurricane from which it would be very difficult to recover. So, today we have taken measures aimed at strengthening from here on the financial sector. The steps taken are some in a series of economic decisions. The economic adjustment continues. Following on from this, the budget for the coming year will be reduced by 1.5 (b) billion pesos (more than one (b) billion U-S dollars)." SUPER CAPTION: Andres Pastrana, President of Colombia The measures must be approved by Colombia's constitutional court, which in 1997 blocked the last such attempt to invoke an economic emergency. Supporters claim the main objective is to heal the economy and protect millions of families who face losing their homes due to defaults on the mortgage. Some will qualify for mortgage payment relief over six months in the event of redundancy. The announcement was met with reserved optimism. SOUNDBITE: (Spanish) "The president's plan seems to be excellent because there will be complete change in Colombia. He says that he is going to create more housing, loan more money to industry. The president's ideas and the way he's going about them seem very good. The thing is, he needs to pull it off." SUPER CAPTION: Edgar Garabito, Travelling Salesman Pastrana's plan has also sparked controversy. Labour leaders say the government is seeking to off load bank losses on to the public, who will suffer the effects of belt-tightening measures most. SOUNDBITE: (Spanish) "These steps aren't going to improve the situation the country is currently in. They are insignificant measures to deal with a big problem and, really, it is punishing small businesses and people who earn a low average salary, and not the people who actually manage the flow of money." SUPER CAPTION: Nelson Leon, Accountant Economic analysts say the main weakness in Colombia's economy has been the government's failure to come up with an effective way to tackle budget deficits inherited from the previous administration. Pastrana insists he will finance his emergency measures with a new tax on withdrawals from savings and checking accounts. His "state of economic and social emergency" will enable him to enact new laws by decree for up to 90 days without congressional approval. You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/2ad9494c214b86d9300096a15666472e Find out more about AP Archive: http://www.aparchive.com/HowWeWork