By Geri Smith When Miguel Caballero started manufacturing bulletproof clothing 12 years ago in his native Bogotá, his country of Colombia was one of the most violent on earth, with 28,000 homicides and 2,000 kidnappings a year. Businessmen, judges, politicians, and journalists, who were targeted by drug traffickers, leftist guerrillas, and illegal paramilitary forces, raced to snap up Caballero's fashionable leather and denim jackets, business suits, and trench coats, which protect against everything from knifings to submachine-gun attacks.
But since President Alvaro Uribe took office in 2002 and started cracking down on Colombia's 40-year-old insurgency, the number of violent attacks has been halved. "I'm very happy for my country -- we can all breathe more easily," says Caballero, 37. "But if Colombia were my only market, the company would be in serious trouble." Business is booming in such places as Mexico and Iraq, where he says demand for bulletproof vests is "enormous." Exports will account for 70% of this year's $4 million in sales.
The drop in violence that forced Caballero to explore new markets is good news for the Colombian economy, which has grown 4% annually since 2002. Exports have nearly doubled. The Bogotá stock exchange is up 60% this year, and foreign direct investment got a big boost with SABMiller's $7.8 billion takeover of Colombian brewer Bavaria on Oct. 12.
BLOODY POWER STRUGGLE. No wonder Uribe enjoys popularity ratings nearing 80%. Many Colombians applauded when the Supreme Court ruled on Oct. 19 that a new law allowing Presidents to run for reelection is legal. Uribe is expected to easily win a second, four-year term next May (see BW Online, 12/13/04, "Colombia's Tough Policy Will Continue"). "If we have eight years with this guy as president, I think the country can really change for the better," says Caballero. He recently delivered a bulletproof guayabera shirt to Uribe, 53, who has survived numerous assassination attempts.
Still, not all is well in Colombia. Although terrorist incidents in major cities have subsided, more than 16,000 leftist guerrillas from the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN), and around 11,000 right-wing paramilitaries who mobilized to fight them, still terrorize large sections of rural Colombia. What began in the 1960s as a revolutionary armed movement demanding agrarian reform deteriorated long ago into a bloody power struggle over areas that produce 90% of the cocaine and half of the heroin consumed in the U.S. The guerrillas and paramilitaries finance their military operations through drug trafficking.
Uribe, whose own father was slain by guerrillas, has vowed to wipe them out -- or force them to the negotiating table. With the help of more than $3 billion in U.S. aid since 2000, the Colombian Army has killed thousands of rebels and destroyed tens of thousands of acres of coca crops (see BW Online, 9/21/05, "Colombia's Progress -- and a Plea").
LANDLESS PEASANTS. But cocaine continues to flow into the U.S., and in 2004 the coca-planted acreage showed no decline over the previous year. The guerrillas hold hundreds of hostages, including three American defense contractors and Ingrid Betancourt, a Colombian presidential candidate nabbed in 2002.
Since August, they have staged several "armed stoppages" in areas they control, blocking highways and interrupting public services in a defiant show of force. Paramilitaries continue to commit human-rights atrocities, yet the government plans to let them rejoin society with minimal punishment -- and without paying reparations to victims -- as long as they turn in their arms. Around 3.5 million peasants have been forced from their land by the violence, giving Colombia the highest number of internal refugees in the world after Sudan.
If Uribe wins reelection, he'll have to shift some attention to growing social pressures. Some 52% of Colombians are poor, and 14% of the workforce is unemployed -- one of the highest rates in Latin America. "Poverty is worsening, there's more underemployment, and the jobs the government says are being created are temporary, nonunion jobs that pay no social-security benefits," says Carlos Rodriguez, president of CUT, the national labor confederation.
Even in industries that are booming, workers earn little. In Facatativá, just outside of Bogotá, emerald-green hills are studded with hundreds of greenhouses, where nearly $800 million worth of fresh flowers are harvested annually for export. The flowers enter the U.S. duty-free, thanks to a 14-year-old agreement aimed at helping Andean countries boost nontraditional exports to discourage farmers' dependence on drug crops. Two dozen Colombian-grown roses cost as little as $8 in New York City.
FREE-TRADE AGREEMENT? Elena Bustos earns $150 to $180 a month, working 12-hour days, picking and packing the flowers. Bustos, 40, who works at a nursery owned by Miami-based Dole Fresh Flowers, lives in a rented one-room apartment with her husband and two teenage sons. "We can never make ends meet -- we always owe money," she confided one recent afternoon while attending a union meeting. "The managers put incredible pressure on you to do more and more, and remind you they could replace you with nonunion labor in a minute," she says.
Some are hopeful that a free-trade agreement under negotiation by Colombia, Ecuador, and Peru with the U.S. will attract foreign investment and better-paying jobs. The Andean region's special trade benefits expire in 2006. If they don't sign on to the free-trade agreement, there's no guarantee the U.S. Congress will continue their duty-free status.
Yet, farmers are worried that heavily subsidized U.S. agricultural products will swamp the country, as they did in Mexico under the North American Free Trade Agreement. And businesspeople like Nagib Neme fear that foreign firms will choose to export their products to Colombia, rather than invest to produce them in the country. His family-run company, Chaid Neme Hermanos, employs 5,600 workers who manufacture auto parts for local General Motors (GM), Ford (F), and Renault assembly plants, and for export to 38 countries. He's expecting Colombia to be flooded with refurbished, American-made auto parts. "If that happens, it could put us out of business," Neme worries.
FUTURE UNCERTAIN. Colombians have conflicting emotions these days. They feel safer than they have in years, thanks to the U.S.-financed crackdown on the armed rebels. At the same time, they worry that Uribe -- the Bush Administration's staunchest supporter in Latin America -- could, like Bush, stumble in a second term. His sometimes-authoritarian approach, they fear, could harden, weakening one of Latin America's longest-running democracies.
"I'm worried because we are spending so much on the military conflict, it leaves very little for needed social development," says Amparo Cadavid, a university professor who for 18 years lived in Colombia's violent conflict zones, helping local communities learn how to survive the cross fire.
The senseless armed struggle has stolen the future from several generations of Colombians, and it's unlikely to end anytime soon. Clearly, Uribe has to hold the line against the rebels. Still, it's time for him to start listening to Colombians who are clamoring for better working conditions, more respect for human rights and labor rights, and better schools and health care for the poor. Otherwise, some may wonder how substantial the peace dividend really is.
Smith is BusinessWeek's chief correspondent for Latin America