PRESIDENTIAL CAMPAIGNING AND NEW LOW INCOME

UNCLAS SECTION 01 OF 02 BOGOTA 006450

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: EFIN ECON CO
SUBJECT: PRESIDENTIAL CAMPAIGNING AND NEW LOW INCOME
HOUSING PROGRAM HIGHLIGHTS ANNUAL BANKING CONFERENCE

Sensitive but Unclassified - Please protect accordingly


1. (SBU) Summary. The national banking association,s
(Asobancaria) annual conference served as an opportunity for
presidential hopefuls to showcase their social agendas. The
highlight of the conference was the announcement that banks
would make over USD 430 million available in GOC-guaranteed
funds for housing loans to low-income Colombians. The
following day, President Uribe announced a GOC guarantee
program for these loans. According to Asobancaria officials,
the loan program came at the request of President Uribe. End
Summary.

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Political Leaders, Development Plans
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2. (U) On the eve of an election year, the Colombian Banking
Association,s annual conference focused on social
development issues. President Uribe and political leaders
Antonio Navarro Wolff, Enrique Penalosa, and Juan Manuel
Santos spoke at the conference. Wolff used the conference as
a platform to campaign for the presidency. While there has
been some talk that Penalosa was planning to run for the
presidency, his intentions remain unclear. Santos, on the
other hand, promoted President Uribe's policies during the
event.


3. (U) The four speakers outlined their views on the need to
improve social equality, territorial transfers, and the tax
system. As the talks turned to economic development, Navarro
Wolff talked about the importance of developing Colombia,s
domestic economy, while the other candidates discussed the
benefits of export growth and supported the negotiation of
the U.S.-Andean Free Trade Agreement.


4. (U) Each of the speakers had differing views on handling
the armed conflict. Navarro Wolff stressed the need to bring
the armed groups back to the negotiating table, as the
cheapest and most efficient way of achieving peace.
Penalosa, a former mayor of Bogota, said that after 40 years
of conflict, the Colombian people still did not have a clear
idea of what the guerillas wanted from the government.
Although Penalosa did not rule out negotiations, he stated
the GOC should not dismiss the idea of using military force
to impose order. Former Treasury Minister Santos suggested
that the government open a dialogue with the armed groups,
but he added it shouldn,t be at the expense of democratic
security. At the conclusion of the conference, President
Uribe detailed the successes of his administration in
restoring security throughout Colombia.


5. (U) With regard to improving social development, Penalosa
said access to bilingual education for all Colombians would
help the country compete in the global economy. Navarro
Wolff focused on the need to distribute education, health,
jobs, services, and technological development across a wider
range of Colombians. He proposed that the government fund
the PhD studies of 3,000 young professionals, including at
institutions outside of Colombia. Santos, opposed this idea,
saying the maintenance of macroeconomic and institutional
stability was key to sustainable growth. Other areas could
not be focused upon. &What are those 3,000 Ph.Ds going to
do in Colombia if there are not entities or companies that
demand their services? It will only depress their salaries,
but not increase growth or well-being.8


6. (U) In his presentation, President Uribe focused on
inclusion. He said he was proud the GOC was increasing the
number of individuals included in the value added tax
collection. He also suggested lowering income taxes while
broadening the tax base. He stressed that more Colombians
should have access to credit and suggested facilitating
credit for agricultural businesses.

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Low-income Housing Pledge
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7. (U) On the final day of the conference, Asobancaria,s
president, Patricia Cardenas, announced that beginning July,
2005, Colombia,s banks pledged one trillion Colombian pesos
(over USD 431 million) for new housing loans over the next
year, available only to the poorest Colombians. President
Uribe immediately applauded Asobancaria,s gesture. He
assured the banking industry that FOGAFIN (The Financial
Institutions Guarantees Fund),the governmental organization
that protects banks against defaults on loans, would protect
all of these loans (to the apparent surprise of the director
of FOGAFIN). Low-income individuals can only apply for
housing loans, and these loans must be no more than 26.7
million pesos (USD 11,500) in value. Regardless of the
requirements, it is estimated that 52,000 families will
benefit from this new loan program.


8. (U) On Friday, July 24th, Uribe made good on his promise
by allocating 20 billion Colombian pesos (USD 8.6 million) to
pay for credit insurance on the newly pledged high-risk
loans. In addition to identifying the resources for the
program, the GOC is waiving FOGAFIN,s rigorous 15-step loan
qualification procedure for these high-risk individuals.

9. (SBU) Comment. On the margins of the conference, an
Asobancaria official explained that the Association,s pledge
to increase low-income housing loans was not as spontaneous
as it appeared. According to the official, Cardenas received
a phone call from Uribe on the first day of the conference
urging the banking industry to make such a pledge the
following day. Although no threats were made, the official
said Uribe made it clear the banking industry would regret
not doing so. Cardenas hurriedly contacted the heads of all
28 banks associated within Asobancaria (all of Colombia's
large banks) to explain the situation and ask that they
participate in the low-income loan program. The following
day, Cardenas had a private conference call with Uribe
indicating the banks agreed to the plan. According to
banking officials, few of the foreign banks will participate
directly in the program, although some have offered to help
the GOC design a low-income housing policy. End comment.
WOOD