VZCZCXYZ0000
RR RUEHWEB

DE RUEHBO #2156/01 1681915
ZNR UUUUU ZZH
R 161915Z JUN 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 3170
INFO RUEHCV/AMEMBASSY CARACAS 0535
RUEHPE/AMEMBASSY LIMA 6263
RUEHLP/AMEMBASSY LA PAZ JUN QUITO 6931
RUEHZP/AMEMBASSY PANAMA 1856
RUEHBR/AMEMBASSY BRASILIA 8238

UNCLAS BOGOTA 002156 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON SOCI EFIS EAID EIND ELAB EWWT EAGR CO
SUBJECT: COLOMBIA'S PACIFIC COAST: CAN THE PRIVATE SECTOR 
SPUR DEVELOPMENT? 
 
REF: A. BOGOTA 540 
     ¶B. 07 BOGOTA 2533 
     ¶C. 07 BOGOTA 2274 
 
¶1.  (U)  SUMMARY.  Colombia's largely Afro-Colombian Pacific 
coast suffers from high unemployment, isolation and poverty. 
Poor infrastructure and lack of human capital hobble 
development.  The coast's three most important cities, 
Buenaventura, Tumaco and Quibdo, generate the majority of its 
economic activity but differ substantially in their level of 
infrastructure.  Buenaventura's port, currently undergoing a 
USD 450 million renovation, acts as the engine for its 
economic development and the reason behind a new USD 1.5 
billion highway.  Tumaco relies increasingly on African palm 
oil production, but decrepit infrastructure remains a 
problem.  Quibdo's isolation from the rest of Colombia 
complicates efforts to take full advantage of its rich 
natural resources.  The region boasts tremendous natural 
resource potential that can be developed by small and 
mid-sized firms if transport issues can be resolved, but it 
is as Colombia's gateway to the Pacific Basin that the region 
should aim to make its mark. END SUMMARY. 
 
Historically Poor and Isolated 
------------------------------ 
 
¶2.  (SBU)  Colombia's Pacific coast (the area west of the 
Cordillera Occidental mountain range) covers five hundred 
miles of rugged landscape between Panama and Ecuador.  The 
coast is isolated from the rest of the country by difficult 
terrain, poor roads, bad weather, and suffers from an 
historical lack of interest from the central government. 
While mountains create a barrier to Colombia's interior, 
dense jungle and a plethora of rivers remain the greatest 
obstacle to the development of reliable transportation 
networks.  Some of the highest levels of rainfall in the 
world, up to 500 inches per year, deluge the region and 
combine with poor soil to make large-scale agricultural 
production complicated. 
 
¶3.  (SBU)  Afro-Colombians, most of whose ancestors migrated 
to the area after Colombia abolished slavery 150 years ago, 
comprise 80 percent of the coast's 1.5 million population. 
Juan de Dios Mosquera, the director of one of Colombia's 
oldest Afro-Colombian NGOs, said the high concentration of 
Afro-Colombians on the Pacific coast makes it easy for the 
central government, which only formally recognized 
Afro-Colombians as a distinct ethnic group in 1991, to ignore 
the region (ref B). 
 
¶4.  (U)  During the first few decades of the 20th century 
Choco experienced a brief period of prosperity from mining, 
particularly gold and platinum.  However, the wealth 
generated did not remain in the Department.  Outsiders owned 
and ran the mines and when the mines ran out they left. 
Government is the chief employer in the region, but mining 
still generates more income than any other licit private 
sector activity.  Locals still insist that they see few 
benefits. (Note: in Colombia subsurface resources are 
considered property of the state not the landowner). 
 
¶5.  (U)  The Pacific coast has some of the poorest 
quality-of-life indicators in all Colombia.  Poverty levels 
of 65 percent exceed the national average by 30 percent. 
Extreme poverty levels of 30 percent and illiteracy rates of 
20 percent are double the national average.  The level of 
Unsatisfied Basic Needs (potable water, electricity, safe 
wastewater facilities, etc.) also averages double national 
figures.  Virtually all of the urban population concentrates 
in three cities: land-locked Quibdo in Choco Department, the 
busy port town of Buenaventura in Valle del Cauca Department, 
and Tumaco, Colombia's southernmost port in Narino 
Department.  These three cities generate virtually all of the 
region's formal, non-mining, economic activity. 
 
Deluged by Unemployment, Exploited Resources, and Brain Drain 
--------------------------------------------- ---------------- 
 
¶5.  (SBU)  Chamber of Commerce representatives told Econoff 
that unemployment rates reach 30 percent in Buenaventura, 60 
percent in Tumaco, and 80 percent in Quibdo.  USAID has 
earmarked USD 15 million to help spur employment in the 
Buenaventura and Tumaco as well as the Pacific coast 
department of Cauca.  Lack of access to credit for small 
businesses throughout the region exacerbates unemployment. 
 
Rural "communal Afro-Colombian territories" cover close to 70 
percent of the region but the communities are unable to use 
the land (their major asset) as collateral since it is 
legally inalienable.  Econoff met with local banks in the 
region who said they made credit readily available to small 
businesses but Chamber representatives scoffed at this, 
telling Econoff that banks focus credit on high-interest 
consumer loans. 
 
¶7.  (SBU)  The collapse of the region's fishing industry, 
traditionally the biggest employer in Buenaventura and 
Tumaco,  significantly contributes to unemployment. 
Buenaventura Chamber of Commerce fishing representative Henry 
Lopez said depleted stocks and rising fuel costs reduced 
fishing income and employment by over 40 percent since 2000. 
Lopez pointed to an abandoned Japanese fish processing plant 
and explained that Japanese boats fished local waters until a 
few years ago when they simply pulled up and left.  Tumaco 
fishing company owners told Econoff that catch has dropped by 
80 percent since 2000 and they laid off most of their workers 
as a result.  Admitting that overfishing led to the problem, 
one owner called increased narcotrafficking on local rivers, 
rising fuel costs, and the dollar devaluation the "final 
straws." 
 
¶8.  (SBU)  The region has largely failed to take advantage of 
its rich natural resources according to Quibdo Chamber of 
Commerce President Martin Sanchez.  Sanchez said much of the 
lumber used throughout Colombia comes from the extensive 
rainforests of Choco, but that limited value added restricts 
local benefit.  Lumbermill owners in Quibdo described the 
process to Econoff: individuals cut down trees and bring the 
logs to small 3-5 person mills; the mills sell the cut lumber 
to river boats that ship it to the coast; and the product is 
then shipped to larger cities (e.g.  Cali or Cartagena) where 
manufacturers ultimately turn it into furniture or other 
finished products.  Sanchez said the loggers and sawmill 
operators receive a minute fraction of the ultimate value of 
the wood product because the region lacks the infrastructure 
and human capital to create high-quality wood products. 
 
¶9.  (SBU)  The region also suffers from a severe brain drain. 
 Sanchez, a Chocoan who went to medical school in Bogota and 
returned to Quibdo to open up the largest private medical 
clinic in the region, said the absence of good universities 
drives ambitious and able students to migrate to the interior 
for school where they often end up staying for employment 
opportunities and quality of life.  Even those who return 
sometimes do so on a limited basis.  Buenaventura Port 
Commercial Director Andres Rodriguez told Econoff that 
although he had a good job in Buenaventura, his family lives 
in Cali where he spends the weekends.  Rodriguez showed 
Econoff abandoned and decrepit areas the government had set 
aside as "duty-free" manufacturing zones where companies 
could import raw materials, create their products with local 
labor, and export them -- all duty free.  Rodriguez explained 
that one international jean company had opened a duty-free 
factory a few years ago, but soon gave up due to a lack of 
skilled employees. 
 
Rays of Sunshine: Aphrodisiac Jam, African Palm and Ecotourism 
--------------------------------------------- ----------------- 
 
¶10.  (SBU)  Former mayor of Quibdo Arnobio Cordoba said that 
while mining generates most of the Choco's income, renewable 
resources such as timber and agricultural products have 
greater long-term potential.  However, Cordoba added that for 
such products to become financially viable, particularly in 
the absence of reliable roads, manufacturers need to add 
local value.  Jorge Toro Moreno thinks he has figured out how 
to just that.  Toro's company specializes in making products 
from "borojo," a nutritious tropical fruit traditionally 
considered to have aphrodisiac properties.  Toro told Econoff 
that while it would be economically inefficient to simply 
export raw borojo, he can employ over 100 workers directly 
and indirectly by producing borojo jam, juice, and wine. 
USAID similarly supports value-added agribusiness efforts in 
Quibdo focused on processing and packaging locally grown 
organic spices.  Cordoba has begun developing a project to 
link local businessmen with investors and manufacturers to 
help create greater value locally. 
 
¶11.  (SBU)  Palm oil represents the most significant growth 
sector for the Tumaco region (ref C).  Tumaco Chamber of 
Commerce Board member Santiago Correa explained that the area 
 
produces ten percent of Colombia's palm oil, the value of 
which has increased by 50 percent over the last five years. 
Palm oil production currently employs over 10,000 workers in 
the area, over half on small and medium sized family-owned 
plantations.  Correa said the 35,000 total hectares under 
cultivation around Tumaco could double, or even triple, given 
the amount of unused land suitable for African palm in the 
area.  Correa himself recently moved from selling appliances 
to growing African palm.  Correa said his 200 hectares 
generate an annual 30 percent return on his investment.  He 
cautioned, however, that bud root fungus has started to take 
its toll on African palm around Tumaco, and that production 
and employment gains could reverse. 
¶12.  (SBU)  The rainforests of Choco are internationally 
recognized as some of the most biologically diverse and 
fecund on the planet.  A nascent ecotourism market shows 
potential although security and difficult transportation 
logistics create vulnerabilities.  Quibdo Chamber President 
Sanchez said the kidnapping of six Colombian tourists (one 
with dual Norwegian citizenship) from a beach in Choco in 
January will hurt tourism this year.  Still, he noted that if 
security continues its general upward trend and Choco's 
reputation as an ecotourist destination hits a critical mass, 
the market has the potential to dramatically increase. 
 
Critical Needs:  Security, Infrastructure and Credit 
--------------------------------------------- ------- 
 
¶13.  (SBU)  Buenaventura Chamber of Commerce Executive 
Director Suleyma Banol called security and infrastructure the 
region's principal challenges.  He noted that since the city 
began pulling itself out from a wave of crime that peaked in 
2006, there has been a ten percent increase in new companies, 
construction permits and tourists.  Banol called a USD 1.5 
billion highway between the port and Cali the key development 
for Buenaventura over the next decade (ref A).  The road 
should lower transportation costs significantly as the 
current road often has waits of 12-18 hours for cargo 
vehicles.  Tourism in Buenaventura, virtually an oxymoron 
until recent security gains, now employs 5-10 percent of 
local workers according to Buenaventura Tourism Executive 
Director Oscar Gomez.  Gomez said he expects that number to 
grow significantly upon completion of the highway to Cali. 
The city plans to build a waterside promenade with 
restaurants and shops as an anchor activity for visitors. 
 
¶14.  (SBU)  Buenaventura's port will also expand 
significantly over the next five years.  Port Commercial 
Director Andres Rodriguez said the port hopes to utilize its 
comparative advantage of direct access to Asian markets 
(which the main Atlantic ports of Cartagena, Barranquilla and 
Santa Marta lack).  The port currently handles one-half of 
Colombia's non-coal imports and exports, employs 1,000 
workers, pays the city USD 4.5 million per year in profits 
(the city owns 15 percent of the port), and puts USD 3 
million per year into employment-related education and 
micro-credit loans.  Rodriguez said the port recently 
obtained a 20-year concession extension and started a USD 450 
million investment program to improve cargo handling and 
maximize space usage.  Rodriguez expects cargo to increase by 
75 percent over the next five years. 
 
¶15.   (SBU)  Tumaco Chamber of Commerce President Juan 
Escruceria said rising crime rates, largely linked to 
narcotrafficking in Narino's southern rivers, have made it 
extremely difficult to attract new businesses to the area. 
Noting that all the major infrastructure in Tumaco, the port, 
airport and causeway into the city, are over fifty years old, 
 he said Tumaco's economy desperately needs investment in 
infrastructure.  Since Tumaco already has good transportation 
routes into the interior, Port Director Diego Calonge thinks 
the port has the potential to expand from its current focus 
on exporting African palm oil to handling container shipments 
-- but only if it can attract investment.  Like Buenaventura, 
Tumaco hopes to take advantage of its proximity to Asian 
markets. 
 
¶16.  (SBU)  Quibdo Chamber President Martin Sanchez said 
improved access to credit was critical for Choco's 
development.  Sanchez noted that some banks in Quibdo had 
started offering microcredit, but more needed to be done to 
help small businesses.  He admitted it was unlikely banks 
would make loans on Afro-Colombian communal territories, but 
said the government needed to think creatively about ways to 
help communal territories leverage the value of their lands 
 
to access credit that they could use for development. 
 
¶17.  (SBU)  Even though 70-80 percent of the city's 125,000 
residents suffer from Unsatisfied Basic Needs, Sanchez 
considers the lack of reliable paved roads to Colombia's 
interior a greater problem.  He said that if the government, 
or a private concessionaire, built a reliable road it would 
open up myriad opportunities for private investment if 
various sectors.  Sanchez called the development of a port on 
Choco's coast (less than 50 miles from Quibdo) his "dream," 
noting that it would reduce the cost of imported goods, open 
a market for international exports, and most importantly 
ensure that the GOC maintained a road between the coast, 
Quibdo, and Colombia's interior. 
 
COMMENT: Can the Private Sector Rescue the Pacific? 
--------------------------------------------- ------ 
 
18, (SBU)  While a magnet for development aid, Colombia's 
Pacific remains virgin territory for major investors. 
Although transaction costs and obstacles to development 
abound, this long stretch of undeveloped coastline offers 
significant opportunities for the small and mid-sized firm. 
Value-added timber products, ecotourism, aquaculture, sport 
fishing, and handicrafts all have potential if systems of 
transportation can be improved.  Afro-Colombian communities 
will need to find a response to the credit albatross if they 
are to attract sufficient capital to significantly raise 
living standards.  But it is the window to the Pacific Basin 
that represents the region's most solid comparative 
advantage.  GOC officials--in close cooperation with the 
private sector--would be wise to accelerate infrastructure 
improvements, augment training of local workers, and explore 
greater incentives to bring value-added businesses to the 
region with the lure of trade throughout the Pacific.  End 
Comment. 
 
 
BROWNFIELD