20 MILLION COLOMBIANS LIVE IN POVERTY: GOOD NEWS

UNCLAS SECTION 01 OF 02 BOGOTA 002805 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON ELAB PGOV CO SUBJECT: 20 MILLION COLOMBIANS LIVE IN POVERTY: GOOD NEWS OR BAD? ¶1. (U) SUMMARY. In late August the GOC released 2008 poverty figures showing 46 percent of Colombians live below the poverty line, compared with 53.7 percent in 2002. Extreme poverty declined from 19.7 percent to 17.8 percent over the same period. Urban poverty reduction far outpaced that of rural poverty, and inequality remained unchanged. While the poverty trendline is moving in the right direction, critics note that the GOC will not meet its poverty goals and lament that the Uribe years of high economic growth have only translated into modest gains against the scourge of poverty. END SUMMARY. WHAT DOES IT MEAN TO BE POOR IN COLOMBIA? -------------- ¶2. (U) The 2008 figures were published along with results of a joint effort by the National Statistics Agency (DANE),the National Planning Department (DNP) and several noted economists to make 2008 statistics comparable to 2005 and earlier figures that used a different methodology. (NOTE: No poverty statistics are available for 2006 or 2007. END NOTE.) The poverty line of 270,000 pesos monthly (approximately USD 135) per family member is based on a traditional measure of income required to purchase a basket of basic goods and services, as is the extreme poverty line of 117,000 pesos (approximately USD 59). ¶3. (U) Based on these measures, Colombia's poverty rate dropped from 53.7 percent in 2002 to 50.3 percent in 2005 and to 46 percent in 2008. The extreme poverty rate fell from 19.7 percent in 2002 to 15.7 percent in 2005, but ticked back up to 17.8 percent in 2008, primarily due to inflated food prices in the first half of 2008. ¶4. (U) DNP Director Esteban Piedrahita noted that Colombia's poverty and extreme poverty lines are among the highest in Latin America. According to Piedrahita, using the region's average poverty line would yield a poverty rate in Colombia of 40 vice 46 percent. URBAN POVERTY ERODES FASTER THAN RURAL -------------- ¶5. (U) The poverty rate in Colombia's 13 largest urban areas (which account for 45 percent of the total population) dropped from 40.3 percent in 2002 to 30.7 percent in 2008. Extreme poverty in the largest urban areas dropped from 9.4 percent to 6.8 percent over the same period. While rural poverty dropped at a significantly slower rate, income-based poverty measures tend to overstate rural poverty, since they do not account for food produced for one's own consumption. INEQUALITY REMAINS UNCHANGED -------------- ¶6. (U) The latest numbers indicate a Colombia with the same level of inequality it had when President Uribe took office. Colombia's Gini coefficient (where 0 means absolute equality and 1 means absolute inequality) in 2008 was the same 0.59 it was in 2002. This continues to rank Colombia among the highest levels of inequality in Latin America. POVERTY DECREASE MODEST COMPARED TO HIGH GROWTH -------------- -- ¶7. (SBU) During the period 2002-2008, Colombia's economy grew an impressive 37 percent. However, this growth has not translated into the decrease in poverty many economists and policy-makers had hoped for. Alejandro Gaviria, Chair of the Economics Department of Los Andes University noted that, given these recent statistics, the GOC will not meet its goal of reducing poverty to 29 percent by 2010. Fedesarrollo think tank director Roberto Steiner criticized Uribe's flagship anti-poverty program "Familias en Accion" for its emphasis on urban poverty. He told us the program created a "welfare dependence" among poor people that "served certain electoral interests, but did not offer long-term solutions to poverty." BOGOTA 00002805 002 OF 002 ¶8. (SBU) Defending GOC efforts, Piedrahita pointed to a marked increase in access to government services and the provision of direct food assistance to the extreme poor as two significant steps in fighting the effects of poverty, which, by definition, would not appear in income-measured poverty statistics. Brownfield