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PRESS RELEASE


Protective Tariffs Needed To Control Hot Money Sinking Colombia, Says LaRouche

May 29, 2007 (EIRNS)—Drug-linked speculative capital is pouring into Colombia at an accelerating rate: US$ 5.5 billion since Jan. 1, 2007, as compared to $360 million in the same period last year, according to the Central Bank on May 22. Hot money has driven up the value of the Colombian peso vis a vis the dollar by 5% in the last three weeks, 14% this year, and 21% over the last 12 months, damaging Colombia's already-precarious productive sector, and feeding the crisis in governability developing over revelations of drug mob penetration of all branches of the government.

The official exchange rate is about 1,900 pesos to the dollar; in the drug-infested Magdalena Medio region, dollars are so plentiful they can be bought for 1,000 pesos.

On May 23, the government announced the imposition of minimal controls on short-term capital, requiring "investors" bringing money into the country to deposit 40% of the total at the Central Bank for six months, at no interest, or pay a fine of 9.4% of the total. President Alvaro Uribe told a meeting of the construction industry the day before the measures were announced that such short-term capital used to be called "hot money, but today, very sophistically, it is called portfolio capital."

What the President did not say, is that the single greatest source of hot money flooding the country is the drug trade, against which the limited monetary measures just imposed, while not harmful, will do nothing. In fact, the peso revaluation has accelerated since the government's action, just as it did after the Central Bank imposed similar measures on offshore loans and deposits repatriated by local companies on May 6.

The world's leading physical economist, Lyndon LaRouche pointed out today that what Colombia needs, for starters, is protective tariffs, to defend its trade and economy. Protective tariffs provide the framework under which monetary policies, including full exchange and capital controls, can work, he specified.