Struggling With the Advances of Market Reforms

CARTAGENA, Colombia -- Ten years ago, Tomasa Contreras and her neighbors banded together to dig their own trenches, install their own pipes and illegally tap the city water supply to bring running water to their neglected neighborhood of Torice. Four years later, the waterworks, Aguas de Cartagena, brought in its own pipes and began charging the people of Torice for the service -- plus back charges for water they once tapped for themselves.

Contreras, 44, and her husband, Luis, struggle to pay for this luxury of running water, not to mention the other expenses necessary to keep their household of six functioning in its two-room concrete-block home. This week they scrambled to find their 18-year-old son a pair of black shoes to comply with the public school uniform. At least this year the cost of school registration is the lowest it has ever been, but work remains irregular and scarce and so Contreras considers leaving her family and her country for work that seems, to her eyes, so abundant abroad.

Ironically, Contreras lives in the Colombian city that most benefited from what's known here as the apertura. At the start of the 1990s, Colombia began liberalizing trade and opening its economy. Soon this beautiful colonial city, which is visited by hundreds of thousands of tourists every year and considered the safest city in Colombia, became the country's first producer of industrial chemicals and plastics, and transformed its port into the most active in the nation.

Today, Cartagena's per capita income is the highest in the country. But look around and you'll know you are witnessing what Alberto Abello calls a "statistical illusion.'' Abello, one of the most respected economists in the Carribbean, blames jobless growth and income disparity for the lack of formal employment and the persistent poverty.

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Targeted development efforts haven't helped. Nor have they had an impact on regional disparities between wealthy and poor areas of the country. Just as in the southern states of Mexico and northeastern Brazil, regional development policies in the Caribbean region of Colombia where Cartagena is a major city "have not been fully satisfactory,'' according to the understated language of the World Bank.

According to "Beyond the City,'' a World Bank report to be released in Colombia next week, the gross domestic product per capita in the Caribbean coast of Colombia has been only half of Bogota's for the past 40 years. One-fifth of Colombians live here and more than one-third of its poor.

The report states that investments in education or infrastructure are not always sufficient for economic development. As Abello characterizes it, the region put too much faith in the prosperity that liberalization and decentralization promised. So any hopes to "ride the wave'' were dashed when the wave never materialized.

Some believed that the market on its own would create the conditions to attract businesses and create jobs. Unlike other countries faced with similar challenges to bring the benefits of free markets to "laggard regions,'' Colombia did not provide incentives for new businesses and counted on infrastructure investment and the promise of the market itself.

The Caribbean coast of Colombia appears to have the right components for success -- its proximity to Miami (two and a half hours by air), its modern ports, its tourism. So far, however, the number of companies that have relocated here has been exactly zero.

Abello now fears the free trade agreement with the United States will make things worse. The elimination of Colombia's 15 percent import tariff on chemical substances could very well wipe out most of the 11,000-plus industrial jobs now found in the city, with untold negative implications for the regional economy.

It would seem that the region's experience so far offers important evidence not to discard tariffs and direct incentives because they may violate or distort the free market model so touted by Washington and the World Trade Organization. Even the World Bank report acknowledges that countries such as Italy, Portugal or Spain, with strong regional development problems, "would find it difficult to subscribe to the notion that no intervention be made'' in those regions.

For Contreras, apertura and the public investment in infrastructure and education that came later have been a mixed blessing. Today more cartageneros have water, telephone, gas, electricity and sewer service. But because there has not been a comparable increase in jobs and wealth, Contreras and her neighbors now have new bills that did not exist when they only had a dirt floor and a roof over their heads, bills they now struggle to pay.

Marcela Sanchez's e-mail address is desdewash@washpost.com.