FARC Is a `Paper Tiger' After Offensive, Desertions (Update1)

Oct. 29 (Bloomberg) -- Colombian Vice President Francisco Santos called Latin America's biggest guerrilla group a ``paper tiger'' with little control of the nation's territory.

``They have really been diminished to the point where we can say they are a minimal threat to Colombian security,'' Santos said yesterday in an interview with Bloomberg Television in Tokyo. ``After six years of going after them, reducing their income and promoting reinsertion of most of their members, they look like a paper tiger.''

The Revolutionary Armed Forces of Colombia, known as the FARC, has lost almost half its fighting force since President Alvaro Uribe took office in 2002 and pledged to attack the drug-funded group in their jungle camps. Hunger and disillusionment have encouraged as many as 11,200 members to risk execution and desert the ranks, cutting their numbers down to about 8,000.

The FARC, founded in 1964 as a peasant-based, Marxist group, has also lost most of its valuable bargaining chips, after the escape in July of 15 kidnap victims including former presidential candidate Ingrid Betancourt and three U.S. citizens. On Oct. 26, former lawmaker Oscar Tulio Lizcano and his FARC jailer ran for three nights through the jungle to escape.

Crushing the rebels will take time, Santos said. The 500,000 square kilometers (193,000 square miles) of jungle in Colombia makes it hard to track them down to fight, he said.

Minimum Impact

``We have reduced their ability to impact Colombian society and Colombia's economy to a minimum level,'' said Santos, 47. ``It's just a matter of keeping up pressure on them and going after them and then they will be ready to have some negotiation.''

The FARC, which has refused to bargain the release of hostages with the government, yesterday indicated it may be ready to discuss swapping captives for jailed guerrillas with a group of Colombian politicians and journalists. The rebels hold 28 so-called high-value captives they consider negotiating tools to weaken the government's hard line against them and another 700 or so to be used for ransom.

The government has been accused by human rights groups of inflating the number of FARC fighters killed in action by executing peasants and youths and presenting their bodies as guerrillas with gun shot wounds. The military is rewarded for meeting a monthly body count quota.

Uribe this morning purged 25 army officers, including three generals, for suspected involvement in the deaths of 19 men from Bogota. The victims were lured with the promise of work and their bodies found last month in mass graves in northern Colombia.

Human Rights Violations

Uribe said he wouldn't tolerate such violations of human rights within the military.

``You can't confuse the effectiveness of military operations with cowardice to face delinquents and the distortion of effectiveness by assassinating innocents,'' Uribe said in a televised address from the presidential palace.

Santos, in Japan to seek greater financial ties between the two countries, also said Colombian interest rates are too high and the central bank should reduce them to shore up the economy.

`` Inflation is taming down, and I think they have it under control,'' Santos said in English. ``The problem right now is liquidity. Interest rates in Colombia are too high because of this cooling of the economy.''

Better Positioned

While Colombia is facing an economic slowdown, Santos said it is better positioned now than a decade ago when its financial system collapsed, leading to the closure of several banks.

Until this year, Uribe's success in battling the violence fueled by the drug-funded rebel groups encouraged consumers to increase borrowing for homes and durable goods like washing machines, boosting economic growth to the highest level in almost three decades and speeding up inflation.

Latin America's fourth-largest economy is now slowing faster than the government had previously expected as the global credit crisis and costly lending rates prompt consumers to reduce spending.

The government last month cut its 2008 growth forecast to between 3.8 percent and 4.2 percent from 5 percent and lowered next year's estimate to between 3 percent and 4 percent from 5 percent as the crisis picked up steam.

No country will avoid ``the impact of the economic crisis,'' Santos said.

Consumer Spending

The central bank has raised the benchmark lending rate 16 times since April 2006 to 10 percent to prevent consumer prices getting out of control. Uribe has criticized the bank for being too restrictive and said the spread between U.S. and Colombian interest rates boosts the value of the peso too much, eroding exporters' profits and putting jobs at risk.

The bank indicated at its last board meeting Oct. 24 that its tightening cycle may be ending as food prices decline and bank lending slows.

Colombia, which has about $24 billion in international reserves and has taken advantage of a strong peso over the past five years to reduce its dollar debt, has attracted record levels of foreign investment as the nation's security improves. Santos said Colombia is in more danger from the recession that ``looms around the corner'' than the credit crisis.

The finance ministry and planning department are studying ways to trim spending from next year's 140.5 trillion pesos ($58 billion) budget, he said. The government has already moved up plans to borrow money from international lenders in a bid to cushion itself against the global credit crunch.

``You have to maintain credibility with investors, which is something that's very important to us,'' Santos said.

To contact the reporter on this story: Helen Murphy in Bogota at hmurphy1@bloomberg.netBernard Lo in Hong Kong at blo2@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net