The Other Athens
For dark, light. For conformity, courage. For apathy, love. To each and all things, an equal and opposing force.
We arrived at our hotel here in Colombia’s capital city on Thursday morning. A copy of El Tiempo, one of the national newspapers, sat on the reception desk, apparently unread. On the front page, under the headline, “Grecia se incendia ante el sí al plan de austeridad,” was a rather shocking photo of a bloodied protester struggling to free himself from a state trooper’s clutches. The trooper, seen over the man’s shoulder with an arm around his throat, was wearing a gas mask. His face was hidden. His baton and shield were not.
According to the paper (and our admittedly questionable translation skills), the photo was captured during “violent shocks between police and those who reject cuts, taxes and privatizations.”
You can read the story for yourself in a newspaper of your choosing, Fellow Reckoner. Long story short, Athens is burning. Again. And with her demise comes the far graver concern that the entire economic fabric and political infrastructure of the European continent will ignite with it in a fiery, debt-fueled hellball, soon to implode in spectacular fashion, dragging the world into a New Dark Ages and snuffing out any and all hopes of recovery.
Ok, so that’s a worst case scenario…
But, we repeat, to each and all things, an equal and opposing force. Destruction and creation…coercion and voluntarism…slavery and liberty. And oh yeah, let us not forget…north and south.
Far from the carnage in Athens, from the burning madness of its crowds and flogging batons of its police, there is another Athens, one moving, with almost equal force, in the opposite direction. Owing to its many libraries and universities, Bogotá, the former capital of the New Kingdom of Granada and current capital of Colombia, is sometimes referred to as “The Athens of South America.”
A little over a decade ago, the same year (1999) the euro was inflicted on that continent, to much applause and celebration, Colombia was moving in quite the opposite direction. The nation was plagued with drug wars, a homicide rate that would make today’s Washington D.C. blush and, to top it all off, was about to lose its primary access to foreign credit. The insurgent violence and a banking crisis here had helped trigger six straight quarters of economic contraction between 1998 and 1999. Moody’s and S&P cut her sovereign credit rating to “junk.” The outlook was, at best, grim and few investors wanted anything to do with the place.
During the years that followed, while the Spartans were happily exchanging their drachmas for euros and basking in the fiduciary warmth of their newly acquired trustworthiness-by-association, the Colombians underwent a kind of non-voluntary “austerity program” of their own. Forced to live without the kindness of strangers, the nation’s general government debt level actually fell 10 percentage points of GDP from 2003 to 2007. A leaner, stronger Colombian economy grew at its fastest pace in three decades in 2007 and attracted a record US$10.6 billion in foreign direct investment the following year. Even its homicide rate, long a sore point for foreign investors, has registered dramatic improvement over the last decade, having been reduced by half since 2002.
All this, it must be observed, while the Club Med nations along Europe’s periphery were frolicking in the sun and awarding themselves welfare packages and assorted benefit programs for work they hadn’t then, and probably still haven’t, even done.
As Bill Bonner likes to remind us, individuals and nations rarely get what they want…but they almost always get what they deserve. Today, the two nations are reaping what they sowed.
Currently, Greece is the lowest-rated sovereign in the world, below Ecuador, Jamaica, Pakistan and Grenada. Said Standard & Poor’s after slashing their credit rating by three notches – to triple-C – last month: “In our view, Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece’s official creditors, would result in one or more defaults under our criteria.”
Meanwhile, both Standard & Poor’s and Moody’s recently restated Colombia’s investment-grade credit rating to one that puts the former South American basket case on par with Brazil, Peru and Panama. Additionally, its “stable” outlook should help grease the wheels for future growth and provide an opportunity for real capital formation. Hernando Jose Gomez, the head of Colombia’s National Planning Department, recently told the press that he expects the upgrade will boost foreign direct investment to $14 billion by 2014.
While the Athens of the Mediterranean continues to grab headlines for all the wrong reasons, investors might do well to keep in mind her financial and economic opposite: the Athens of South America.
We’ve been compiling notes from our research trip here this week and hope to have more for you when we get back to Buenos Aires. Stay tuned…