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Columbia: Aid programmes for the people, special loans for the economy

News from 2020-05-06

At the beginning of March, the first Covid 19 cases also became known in Colombia, and since then the number of infected persons has increased dramatically. Felix Klauda, head of the KfW office in Bogotá, reports what this means for the people in the South American country and what measures have been taken against corona.

By mid-April there were 2,700 infections and 109 people lost their lives. Of course, the number of unreported cases is likely to be much higher - and testing capacities are, in fact, quite restricted. The capital Bogotá is the worst affected. There are 5,000 intensive care beds throughout the country - at 11 per 100,000 inhabitants, this is roughly comparable to Italy or France.

The government of President Duque has reacted very quickly and vigorously to stop the virus. A strict curfew has been in force since 25 March and has been extended until 27 April. People are only allowed to leave their homes on their own, either to go for groceries or visit a doctor, or to walk their dogs. Women are only allowed on even days and men only on odd days. For people over 70, the curfew even applies until 31 May. Schools and universities are closed, as are all borders.

Of course, the economic consequences of the crisis can also be felt here. The prices for oil, Colombia's most important export commodity, have fallen by 60% since the beginning of the year, partly due to the collapse in demand. This is now missing from the national treasury. In addition, the national currency is depreciating due to the declining export demand. The economy is therefore expected to shrink by 2% this year. Service industries such as restaurants, cafés, leisure and sports providers are already being hit particularly hard - and the tourism industry is also a key growth driver.

The streets of Bogotá are empty.

Social impacts

However, the social consequences of the crisis pose a particular risk. Colombia is a country with great social differences - the gap between rich and poor is particularly pronounced here. 27% of the population live below the poverty line. Official unemployment is around 10% and could rise to 25% due to corona. But on top of this, around 50% of people work in the informal sector: they have no fixed income and have to look for work every day to feed themselves and their families.

An additional challenge is the reception, care and integration of around 1.7 million migrants from neighbouring Venezuela. Most of them live in precarious housing conditions without a permanent job and are already difficult for the state to grasp - not to mention the need to enforce rigorous "social distancing" under these circumstances. If the state does not succeed in providing these people with increased support during curfew, the social dynamite in the poor districts threatens to explode. Due to the lack of prospects, the first migrants have started to return to their - even more crisis-stricken - homelands.

Zwei fahrradlieferanten
Food couriers wait on an empty street for orders.

Economic and socio-political countermeasures of the government

The government has already adopted countermeasures to prevent an escalation. The direct aid programmes for poor population groups have been increased by EUR 4 billion. From this, disadvantaged families, young people and the elderly will receive direct payments and in some cases also food aid during the crisis. Over five million families, i.e. more than a third of the population, are to be reached in this way. The basic public supply of water and electricity for poor households is also to be supported by the state - through a deferral of payments for up to three years.

As in Germany, companies and thus the economic foundations are at risk in Colombia, too. Therefore, in addition to the possibility of deferring current loans, there are also short-term credit lines which - similar to KfW's special programme in Germany - are offered by the national promotional banks and extended through commercial banks. Thanks to its experience in Germany, KfW is in direct contact with its national partner banks to support them financially and in terms of content on behalf of the German federal government. With a view to leveraging forces and resources in order to face this crisis together.