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Sustaining the Medellin Miracle
Colombia Struggles to Hold On To Gains From Globalization

By Anthony Faiola
Washington Post Staff Writer
Friday, July 11, 2008

MEDELLIN, Colombia -- This labyrinthine metropolis transformed over the course of a decade from a battlefield of drug lords, paramilitaries and leftist guerrillas into one of the safest, most dynamic cities in Latin America. Visionary inner-city renewal projects and a push to take back the lawless hillside slums by force deserve credit, but many here hail an unsung hero in Medellin's urban miracle -- globalization.

Exports surged in the 1990s as the United States granted temporary trade preferences to Colombia, allowing many of its products to enter the world's largest market duty-free. They really took off after 2002, when Washington expanded that agreement to include Colombia's all-important textile sector. Humming assembly lines making Ralph Lauren socks and Levi's jeans sprang up across this picturesque Andean valley, creating tens of thousands of jobs and turning Medellin into a model of the curative power of liberalized trade.

Yet the renaissance of a city best known outside Colombia for years as the base of Pablo Escobar and the Medellin cartel is entering a period of uncertainty that illustrates just how fragile such gains can be. The city's export industry has begun to slip backward, officials here say. It happens as Colombia and many developing nations are struggling to maintain their edge in the increasingly competitive world of global trade.

Inside the three sprawling factories of Crystal, a major textile maker here, the workforce doubled to 11,000 between 2001 to 2006 as the company's U.S. sales surged. But following several local apparel makers, it has eliminated hundreds of jobs as contracts have dried up over the past 18 months.

The weakening dollar, which has shed almost 40 percent of its value against the Colombian peso in two years, has made it even harder to compete with cheaper production costs in China, where officials in Beijing are managing the exchange rate, cushioning the dollar's fall to help Chinese exporters. Since 2005, Colombia's textile and apparel exports to the United States dived 30.8 percent while China's soared by 44.3 percent.

Colombia is also up against a resurgent global backlash to free trade -- including in the United States, the country that had spent the past two decades cajoling Latin America to open its markets. An election-year debate has politicians in Washington blaming globalization for the loss of U.S. jobs, holding up a vote in Congress on a free trade agreement with Colombia. That bill would make the current trade preferences permanent while allowing most U.S. products to enter Colombia duty-free.

Colombia remains a vocal proponent of free trade at a time when the loudest voices in the region are against it. In neighboring Venezuela, Colombia's second-largest trading partner, President Hugo Chávez is shifting the country toward socialism, nationalizing industries and barring the doors to free trade. He has signaled Venezuela's intent to pull out of a regional trading bloc that includes Colombia and has sharply reduced quotas on Colombian-made cars. In recent months, that decision has forced Sofasa, a leading automaker in Medellin, to reduce shifts and lay off 600 workers.

Companies say doubts about Colombia's future trading relationship with the United States have been a factor in a recent flow of jobs from Medellin into Central America, where a bloc of nations sealed a free trade agreement with the United States in 2006.

"If my client is wondering if a pair of socks made in Medellin will make it to the U.S. duty-free this time next year, they will just go to Central America," said Luis Fernando Restrepo Echavarría, Crystal's president. "That's exactly what they're doing."

A Flower Revolution

On the eastern outskirts of Medellin, the emerald foothills of the Andes give way to acres of blinding color. Expansive greenhouses filled with blooming purple pompons, yellow chrysanthemums and white lilies carpet the dark earth. This is how Colombia's export revolution began -- with flowers.

In 1991, with Medellin's ghettos convulsing in cocaine wars and leftist guerrillas infiltrating the city, the U.S. government extended a lifeline to Colombia and other Andean countries plagued by drug violence. It granted them renewable "trade preferences," providing local manufacturers the right to sell their wares in the United States without paying tariffs. It gave Colombian flower exporters the competitive edge they needed to dominate the U.S. market. Today, Colombian flowers make up roughly 90 percent of all those sold in the United States.

Here, it created jobs -- jobs that some analysts argue are the kind that U.S. workers should be willing to give up in the era of globalization. These labor intensive and minimum wage jobs in the United States are often filled by undocumented immigrants, but in this region, they provide a lifeline for rural people. Many of the U.S. companies in California and Texas that once grew flowers adapted and evolved into suppliers and distributors of flowers grown here, where a single stem can be planted, irrigated, trimmed, cut and packaged for about $1.

"It is one of the effects of globalization," said Juan María Cock, president of Uniflor, one of the region's biggest flower exporters. He is also an economist and former adviser at the International Monetary Fund. "We have the advantages of labor and a tropical climate with lots of light and sun. There was no way you could compete with us or any good reason why you should want to."

The thousands of new jobs in the flower sector provided economic refuge for many Colombians escaping the violence of a drug-fueled civil war. Inside one of Uniflor's vast greenhouses, Luz Dari García, 20, waters flowers for a living. Her father was killed in 2002 in their village 50 miles north, caught in the crossfire of left-wing guerrillas and right-wing paramilitaries. She fled with her mother and elder brother to the suburban belts of Medellin "because we knew there were jobs here."

Her older brother landed work early tending flower fields. She began similar work last year, earning the minimum wage of about $250 a month. By no means a princely sum -- even in Colombia -- it is far more than the family earned raising fruit and vegetables in their village. "We were able to build a life because there was work," she said.

Transforming a City

In the steep hillsides of Medellin, warring drug gangs long ruled the dense western ghetto where Lina Marcela Zapata resides in a two-room cement-block home. The 26-year-old single mother recalls huddling with her small son in the corner during shootouts, fearing a stray bullet such as the one that killed a neighbor's daughter. More horrific, she said, was the time drug gangs sought to teach locals a lesson, cutting off the legs of a 9-year-old girl and flinging her body off the highest cliff. "We could not sleep because of all the gunfire," she said, closing her eyes and shaking her head as she remembered.

The guns have quieted in Medellin. In 1991, the annual murder rate was 381 per 100,000 people -- a virtual war zone. In 2001, it was 174 per 100,000. Last year, it fell to 26 per 100,000, or lower than the District.

A combination of factors produced that change. President Alvaro Uribe, Medellin's native son, came to power in 2002, shifting from Andres Pastrana's policy of dialogue to one of force. The Colombian military and local police stormed the most violent barrios of Medellin in armored vehicles and helicopters. In other neighborhoods, calm came as the drug gang headed by the notorious paramilitary leader Diego Fernando Murillo finally overpowered its rivals. Murillo was extradited to the United States with 12 other paramilitary chiefs in May.

Around the same time, Sergio Fajardo, a mathematician with Bee Gees hair, became Medellin's mayor and launched his own campaign to renew the city. He rolled out social programs while building schools, police stations and "library parks" celebrated for their architecture. Two cable cars systems were constructed, linking some of Medellin's toughest and most isolated slums with the city's expanding metro system.

If those efforts became the bricks of Medellin's house of change, globalization was the mortar that helped keep them together, officials say.

Exports to the United States from the state of Antioquia, with Medellin as its core, went from $268 million in 1991 to $1.18 billion in 2005, creating an estimated 360,000 jobs and helping halve the unemployment rate to 10 percent, according to government statistics and Colombian export associations. The windfall in taxes became a critical source of revenue to fund the projects that transformed the city. "You could say that export growth helped us help ourselves," Fajardo said.

The Cost of Uncertainty

Some of those gains are slipping away.

Over the past two years, Ralph Lauren closed a regional office in Medellin and one major jeans factory shut its doors, dismissing 2,500 workers. Crystal has shed 1,000 jobs -- or 10 percent of its workforce. Other textile makers have been forced to do the same, with the industry losing an estimated 10,000 jobs in total.

As in many developing countries with manufacturing-based export industries, one huge problem is China. Colombia's average textile wage of $1.42 an hour is about double similar wages in China. Many here argue that the United States and Europe must pressure China more to revalue its currency, something Beijing has resisted. They are also pressing for a formal free trade agreement with the United States .

An agreement would make permanent the duty-free access for most Colombian exports to the United States , while also granting U.S. products reciprocal status in Colombia t for the first time. The current preference agreement is subject to regular reviews and renewals by Congress. A vote in March approved those preferences through December, when a new vote will be required to extend them. The uncertainty, officials here say, is costing jobs and money.

Crystal, for instance, recently lost a $10 million contract with Footlocker to produce T-shirts as the U.S. company shifted sourcing to Honduras, which executives here say has an unfair advantage over Colombia in that it has a free trade agreement. Other U.S. clients, such as Russell , owners of the Spalding and Huffy Sports brands, are hedging their bets, shifting half their sourcing to Honduras.

Although strongly backed by the Bush administration, an a free-trade pact with Colombia -- as well as other pending agreements with South Korea and Panama -- have been blocked by Democrats. Some are calling for a review of all future free trade agreements to assess their impact on U.S. workers.

Given the relatively small Colombian economy, opposition to the pact has focused less on the potential loss of U.S. jobs and more on the plight of Colombian unionists.

The Colombian government, critics argue, adheres to draconian laws that strongly discourage organized labor. "If the deal passes, you would be sending a signal that the U.S. has no regard for the welfare of workers in the countries where you buy your products," said Hector Vásquez, a director of the National Institute of Unions in Medellin.

Some here also say it would be better to stick with the preferences, rather than sign a pact that would create more competition for domestic companies by allowing U.S. products to enter Colombia duty-free.

Yet many Colombian industry leaders seem to think they have more to lose if they don't strike a deal.

"We are afraid of losing what we have built, afraid of what is starting to be a crisis of confidence in Colombia that is leading our clients to move elsewhere," said Luis Fernando González Usuga, Medellin head of the National Export Association. "The U.S. has always talked about why Latin America needs free trade. Well, now we're true believers in Colombia. Why turn us away?"

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