Colombian unemployment rate has been between 7.0% and 19.9% in the last 49 years. This high unemployment rate is partially explained by the economic policy of inflation reduction taken since 1991 by Central Bank of Colombia. Under fair economic scenario, it would be tolerable an increasing unemployment in order to reduce the inflation rate, but it is so costly under an internal war conflict such in Colombia. Of course, the Central Bank of Colombia made her job properly; the inflation rate faced an important reduction until reaching 2.4% in 2012, but unemployment increased to reach 9.6% in 2012. This high unemployment rate has feeded the terrorism partially because Colombia faces high unfair income distribution; people have to live on and terrorism well payed is an option in a country were security is poor. This note shows how unemployment pushed up the cases of kidnapping in Colombia during 1964 to 2012. The lesson has to be learned, Monetary Policy and Governments (central and locals) have to work hard to reduce unemployment rate for a successful Peace Meetings ending. On the other hand, in a country with low security and a bulk of population in poverty state, this type of terrorism is an alternative to live on.
Author: Humberto Bernal,
Economist,
e-mail: zhumber@gmail.com
Twitter: Humberto_Bernal
The unemployment rate in Colombia has shown high values since decade of 1960 as figure 1 shows; this rate has been between 7.0% and 19.9%; the lowest value was reached in 1981 and the highest value was in 2000. The Central Bank’s economic policy since 1991 has been targeted to reduce the inflation rate, but it has brought high cost in terms of high unemployment rates; for instance, taking annual information since 1964 from these two variables, one finds as the inflation faces a reduction of 1.0%, the unemployment rate faces an increase of 0.14%; it means more people under unemployment state because this economic policy. Although this policy brought successful results because the inflation rate went from 32.4% in 1990 to 2.4% in 2012, the cost has been high compared with its benefits. This note highlights that inflation targeting in Colombia (get low inflation) brought costs in terms of feeding the terrorism in Colombia. Therefore, it is not advisable taking strong economic policies to reduce inflation when a country faces an internal war.
Figure 1. Unemployment rate in Colombia 1964-2012
(%)
Red line: Average unemployment rate.
Source: Bureau of Statistics Colombia (DANE).
Kidnapping people in Colombia
Unfortunately Colombia has faced one of the highest rates of people kidnapped around the World; one can say that she takes the firsts places around the World. The number of people kidnapped in Colombia since 1964 is 52,150 people!; the number of people kidnapped increased dramatically in 1978 and 1994; the annual number of people kidnapped went from 122 cases in 1978 to 3,706 in 2000 as figure 2 shows; unfortunately, nowadays this number is 305 per year.
Figure 2. Total population kidnapped in Colombia 1964-2012
(Number of people, annual flow)
Source: DNP, Departement of Defece Colombia, Fundación Páis Libre, Cifras y Conceptos and Centro Nacional de Memoria Histórica.
Foreigners have not been absent in this type of terrorism in Colombia. There are 1,051 (this number was 5,563, but is was fixed according to my weekly note on 10th November of 2013) cases reported of foreigners kidnapped in Colombia since 1970; it means 10.1% of total people kidnapped since 1970. The worst years for foreigners in Colombia were between 2005 and 2010 when the annual rate of foreigners kidnapped were between 239 people and 918 people. The main foreigners kidnapped came from Venezuela with 17.0% of total foreigners kidnapped since 1970, the United States with 14.8%, Italy with 6.5%, Germany with 5.6%, and Spain with 5.5% as figure 3 shows. Fortunately, this rate has shown a decline since 2011 when the Pace Meetings start taking place; the number of foreigners kidnapped in 2011 were 10, and 4 in 2012. Of course, just one kidnaped is clear evidence of lacking of security and strong lacking of understanding of Human Rights in a society. This information comes from public data broadcasted by private and public colombian agencies Cifras y Conceptos and Centro Memoria Histórica; these two agencies have accurately information from 1970 to 2010; and Fundación País Libre has partial information for 2011 to 2012.
Figure 3. Source country of foreigners kidnapped in Colombia 1970-2012
(% of total foreigners kidnapped)
Source: DNP, Departement of Defece Colombia, Fundación Páis Libre, Cifras y Conceptos and Centro Nacional de Memoria Histórica.
Relation between unemployment and people kidnapped in Colombia
It is a clear evidence that as the inflation rate shows a decline due to monetary policies, the unemployment rate shows an increase. This evidence comes from many countries and Colombia is into this group. The issue is Colombian economic authorities started to work on low inflation rate while the country faced the worst internal war, so it was such put out fire with gas!. The increase in unemployment rate pushed low income people to do terrorism acts such as kidnaping. It is fair to remember that income distribution in Colombia is unfair in deep; people in poverty state are 32.7% of total population in 2012, and a GINI coefficient of 0.539 in 2012; by 1990 these indicators were worse!!. Therefore, when the costs of low inflation are taking into account, the people kidnapped have to be in this account. An econometric model shows that the reduction of inflation in 1.0% points brings an increase of unemployment rate of 0.14% points, but an increase in unemployment rate of 1.0% pushes up the kidnapping rate in 0.48% points; figure 4 shows the relation between unemployment and kidnapping in Colombia; it is clear evidence of a positive relation. These result have to be taken into account to a successful Peace Meetings because there are approximately 8,500 people in guerrilla troops in 2013 who can fell in this type of terrorism. Therefore, there is a strong challenge for Labour Minister, Central Bank of Colombia and private firms for giving job opportunities to colombians if we are really interested to achieve a Colombia in peace.
Figure 4. Total population kidnapped and people under unemployment state in Colombia 1964-2012
(Variables under natural logarithm)
Source: Bureau Os Statistics Colombia, DNP, Departement of Defece Colombia, Fundación Páis Libre, Cifras y Conceptos and Centro Nacional de Memoria Histórica. Own calculations Stata 12.1.
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