Eclipsed from the headlines by the ongoing carnage, there is an active
civil resistance in Iraq that opposes the occupation, the torture regime
it protects, and the jihadi and Ba'athist 'resistance' alike.
Uribe’s New Economic Reforms Benefit Corporations, Not Colombians
by Garry Leech
The Uribe administration recently announced its intention to implement three reforms that will lead to millions of dollars in additional profits for multinational corporations while promising increased economic hardships for Colombia’s poor majority. In a devastating one-two-three punch, the Uribe government first announced that it intends to partially-privatize the state-owned oil company Ecopetrol and then declared its intentions to slash corporate income taxes while simultaneously increasing the Value Added Tax (VAT) on food basics such as rice, potatoes and chicken.
On July 25, President Uribe announced that the government would sell a 20 percent share in Ecopetrol, despite having promised not to do so during his first term in office. While Uribe did not privatize the company during his first four years, he did restructure Ecopetrol in 2003 in order to meet conditions attached to a $2.1 billion loan from the International Monetary Fund (IMF). The Uribe administration then implemented reforms the following year that no longer required foreign oil companies to enter into partnership with Ecopetrol. While the state oil company had to begin competing with foreign firms for production contracts, it still remained 100 percent state owned.
The proposed sale of a 20 percent stake in Ecopetrol is likely the first step in the complete privatization of the national oil company. The sale of Ecopetrol is just the latest in a series of sales of state assets by the Uribe administration, following on the heels of the privatization of the state telecommunications company Telecom and the state mining company Minercol. However, the partial-privatization of Ecopetrol is not an attempt by the Uribe government to unload a financial burden. To the contrary, Ecopetrol is a significant revenue generator for the government. In 2005, the state-owned oil company earned a record net profit of $1.29 billion after supplying the state’s coffers with $3.23 billion in revenues.
According to Alberto Bernal, associate director at investment banking firm Bear Stearns, the Colombian government will likely earn just over $1 billion from the sale. The one-time payoff, however, will amount to far less than the 20 percent share of future profits that the government will forfeit due to the partial-privatization. Consequently, at a time when high global oil prices have made Ecopetrol a significant financial asset, the Uribe administration intends to hand over this revenue generator to the private sector.
The government is justifying the proposed sale by claiming that it is necessary to prevent the country from becoming a net importer of oil. This argument is fundamentally flawed because previous restructuring and the proposed privatization have ensured that Colombia will purchase increasing amounts of its own oil at global market prices from foreign companies operating in the country. Therefore, whether or not the country remains a net exporter or not is irrelevant from a financial perspective if the government is forced to pay global prices for oil regardless of whether it is produced domestically or overseas.
The inconvenient facts and unanswered questions surrounding the attacks are legion, but the endemic sloppiness of the self-styled "researchers" is delegitimizing the entire project of critiquing the "official version." The ostentatiously named "Truth movement" is not clearing the air, but muddying the water.
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An analysis
From Colombia Journal, July 31:
Uribe’s New Economic Reforms Benefit Corporations, Not Colombians
by Garry Leech
The Uribe administration recently announced its intention to implement three reforms that will lead to millions of dollars in additional profits for multinational corporations while promising increased economic hardships for Colombia’s poor majority. In a devastating one-two-three punch, the Uribe government first announced that it intends to partially-privatize the state-owned oil company Ecopetrol and then declared its intentions to slash corporate income taxes while simultaneously increasing the Value Added Tax (VAT) on food basics such as rice, potatoes and chicken.
On July 25, President Uribe announced that the government would sell a 20 percent share in Ecopetrol, despite having promised not to do so during his first term in office. While Uribe did not privatize the company during his first four years, he did restructure Ecopetrol in 2003 in order to meet conditions attached to a $2.1 billion loan from the International Monetary Fund (IMF). The Uribe administration then implemented reforms the following year that no longer required foreign oil companies to enter into partnership with Ecopetrol. While the state oil company had to begin competing with foreign firms for production contracts, it still remained 100 percent state owned.
The proposed sale of a 20 percent stake in Ecopetrol is likely the first step in the complete privatization of the national oil company. The sale of Ecopetrol is just the latest in a series of sales of state assets by the Uribe administration, following on the heels of the privatization of the state telecommunications company Telecom and the state mining company Minercol. However, the partial-privatization of Ecopetrol is not an attempt by the Uribe government to unload a financial burden. To the contrary, Ecopetrol is a significant revenue generator for the government. In 2005, the state-owned oil company earned a record net profit of $1.29 billion after supplying the state’s coffers with $3.23 billion in revenues.
According to Alberto Bernal, associate director at investment banking firm Bear Stearns, the Colombian government will likely earn just over $1 billion from the sale. The one-time payoff, however, will amount to far less than the 20 percent share of future profits that the government will forfeit due to the partial-privatization. Consequently, at a time when high global oil prices have made Ecopetrol a significant financial asset, the Uribe administration intends to hand over this revenue generator to the private sector.
The government is justifying the proposed sale by claiming that it is necessary to prevent the country from becoming a net importer of oil. This argument is fundamentally flawed because previous restructuring and the proposed privatization have ensured that Colombia will purchase increasing amounts of its own oil at global market prices from foreign companies operating in the country. Therefore, whether or not the country remains a net exporter or not is irrelevant from a financial perspective if the government is forced to pay global prices for oil regardless of whether it is produced domestically or overseas.