Taking a Stand

Colombia last week underwent one major disaster and was saved from another. In rapid succession, two earthquakes rolled across the country, turning buildings into rubble in country towns, shaking up the terrified capital of Bogota and causing 83 deaths and millions of dollars in damage. It was the country's worst earthquake in half a century. But it was hardly worse than the disaster that formed when the week began: almost certain financial collapse. Coffee is Colombia's life (it accounts for 70% of all foreign exchange), and a 10% drop in world coffee prices in the past six months contributed to an 18% drop in the country's foreign exchange earnings. The economy--and the country--was about to grind to a halt. Then President Carlos Lleras Restrepo went on nationwide TV and announced that he had averted bankruptcy by arranging for a $200 million stand-by credit with the International Monetary Fund, AID and the World Bank.

Nationalistic Fires. A 5-ft. 2-in. one time professor of finance, Lleras has proved in less than seven months in office to be one of the scrappiest Presidents in Colombia's modern history. Many of his troubles were inherited from the lackluster government of past President Leon Guillermo Valencia, but Lleras, unlike his predecessor, is not afraid to take a stand. When Communist-led students went on strike across the country shortly after he took over last August, he threatened to bar them from graduation and, ignoring the country's sacred tradition of campus autonomy, sent a platoon of battle-ready troops into Bogota's National University. When a band of 80 Castroite guerrillas went on a rampage in Colombia's remote southern interior, ambushing army patrols, slashing telephone lines and bombing roads and bridges, Lleras quickly moved to put down the insurrection. He not only rushed in 800 troops but hopped a helicopter and flew to the scene himself.

Lleras' biggest battle, however, has been to keep Colombia's economy going in the face of price drops not only of coffee but also of Colombia's banana, sugar and cotton exports. In November, the IMF, the World Bank and AID agreed to grant a stand-by loan that would give Colombia time to diversify and lessen its dependence on coffee. But there was a catch: Colombia had to devalue its peso, a move that would be highly unpopular. Lleras flatly refused, stirred up nationalistic fires in Colombians by informing them that "the governing of the nation was entrusted to us and not to the international organizations." With that, he imposed stiff exchange controls, froze all foreign exchange, cut imports by 44% and plastered the country with "Buy Colombian" billboards.

Canny Chat. Still, as a skilled economist Lleras knew only too well that Colombia badly needed the loan and that there was no way to avoid devaluation. Last week in his televised charla (chat) with the country, he explained that he had reopened talks with the lending agencies and proposed his own "Colombian plan." Beaming, he announced: "Naturally, they accepted it." The plan included further import controls, tight restrictions on capital movement, and something called "full convertibility"--which almost certainly meant a sleight-of-hand devaluation within six months.

It was a face-saving way of devaluing the peso, and Lleras never had to mention the naughty word.

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