Colombia is a beautiful and biodiverse country with some of the most welcoming people in the world. That said, the country is also listed as one of the growing economic influencers as a CIVEST economy (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) with a 4 percent GDP growth in late 2012. Although Colombia has an enviable economy, there is a deep problem on the horizon: the marked income divide between this na- tion’s rich and poor.
Colombia has traditionally had an ambitious and hard-working middle class. Like other global players, the middle class has grown thanks to newfound prosperity and investor opportunities. According to a University of Los Andes report, the middle class in Colombia has doubled over the past decade. However, much of this can be attributed to a significant increase in access to credit and debt; which long-term seems hard to sustain. Unfortunately, a vast majority of the county, some 11.5 million persons – or 58 percent of the population – still resides in extreme poverty or surviving below the minimum wage.
The financial disparity between those who have and those who have not, can be observed when visiting the nation’s other major cities: Barranquilla, Cali and Medellín. In Bogotá, parts of Usaquén and Chicó have beautifully-landscaped public parks and generally well-built infrastructure. By contrast, in the southern districts of the capital, such as sprawling Soacha and Ciudad Bolívar there is an urgent need for the most basic of infrastructure.
The run-down and abandoned social conditions in many barrios makes for the ‘estrato’ designation. According to city’s planning office, Secretaría Distrital de Planeación, the estrato socioeconomic theory indicates that taxation surcharges (or Valorización) and subsidies are imposed on higher ‘estratos’ (4,5 and 6) which should help with the infrastructure development in the lower designated income districts (estratos 1, 2 and 3).
Unfortunately corruption, crime and other national problems prevent a fair distribution of public funds only expanding a “wealth gap” within urban centers. As property values soar in the northern enclaves, south Bogotá real estate prices only increase after the municipality has pumped much-needed maintenance or boosted citizen’s security in tough neighbourhoods.
Furthermore, the federal monthly minimum wage in Colombia is fixed at COP$589,500 (US$320) with an additional monthly COP$70,500 in benefits provided for full time employees. Despite the 4 percent increase from last year’s numbers and after a difficult yearly negotiation process between Central Bank appointees and representatives of unions; inflation is a reality which affects the bottom line of all income levels. Other important costs are fuel at the pump, public services and bank charges: these often increasing during the year beyond inflation.
The World Bank and Labour Ministry do not consider the minimum wage as hovering next to the poverty line; this, despite a great majority of Colombians struggling to provide for their families on wages decreed by law. The financial divide in Colombia is also made more obvious by the capacity of persons to get into debt and refinance their mortgages. For most on a minimum wage, the opportunities offered by private banking are often unknown, unclear and not fully taken advantage of.
The south of Bogotá tends to drive a cash-based, more ‘informal’ economy, while in the more affluent districts, residents empower banks by using credit cards to purchase goods and services. Poor neighborhoods also have limited access to food supplies, mostly sold in small corner stores, which also drives up the price of what should easily be accessible goods. According to Jairo Delgado, an independent consumer researcher, Colombia drags its feet behind other emerging markets such as Brazil, in driving to working poor towards the middle classes. “Colombia is still limited in expanding its wealth base in part due to high import duties, in part due to the lack of educational prospects.”
As the country becomes coveted for its natural resources and foreign direct investment pours in, so do highly-educated professionals looking for new lifestyle opportunities and higher incomes. If the monthly salary of a member of Congress is COP$23 million or US$12,600 there is a 4,000 percent difference between a senior government representative and a worker on the minimum wage.
Colombia’s taxation rates are average compared to a global index. According to a recent KPMG’s assessment of global corporate taxes, Colombia’s rate has shrunk from 35 percent in 2006 to 25 percent in 2013. Although a decrease in corporate taxation should represent an economic incentive to create more jobs, pay higher salaries, and investment in better infrastructure, a decrease in taxation hardly has the “trickle down” effect to those working at the low end salary level.
Perhaps the country’s educational system offers hope for the future. At a close look, Colombia’s two systems -private and public -have historically worked towards offering students opportunities to get higher education. One of the nation’s most prestigious universities, La Universidad Nacional, is public and accepts students not based upon income capacity, but grades. And the country’s technical institution – SENA – every year graduates designers, chefs, electrical engineers and computer technicians so they can join the ranks of the employed.
Without investing in youth, bilingualism and general culture, Colombia’s lower classes are doomed to remain marginalized from greater opportunities. According to Delgado, bridging the income ‘divide’ must start early on in life. “We live in a society which rewards people based on wealth and their capacity to make quick money. We must start rewarding those with good ideas.”
