He is being ultra-cautious, since the economy has already clocked a contraction of just under 15% in the first three quarters (WR-03-47). This represents a substantial turnaround after the 29% plunge recorded in the first quarter, which was almost overwhelmingly due to the two-month strike-lockout staged by the opposition. The planning ministry has projected a positive growth rate of 6.5% for next year.
ECUADOR | Backtracking on crucial gas subsidy. The government of President Lucio Gutiérrez has decided not to eliminate the subsidy on cooking-gas in 2004, only weeks after the economy ministry proposed allowing its price to rise from US$1.60 per 15-kilo canister to US$5 [wr-03-45]. The news did not come in the form of an official communiqué: it was announced by the President's wife, congresswoman Ximena Bohórquez. Indeed, she went considerably further than the cooking-gas subsidy, adding that `there will be no increase in the prices for fuels, and electricity and telephone rates will be frozen.'
A World Bank study had recommended allowing the price of the cooking-gas canister to rise to US$7. The IMF, which had accepted a delay in this matter at the time of reaching an agreement with the government, had been expecting action to be taken in 2004. The unions and indigenous organisations had threatened to stage an `uprising' if the cooking-gas subsidy was eliminated or reduced; a succession of governments have ended up backing away from such a prospect.
COLOMBIA | Bank agrees on buyback from reserves. The Banco de la República (central bank) has told the government that it could use up to US$500m of the country's international reserves to buy back debt, without compromising its ability to cope with `extreme volatility in the financial market'. That amount is equivalent to 4.65% of Colombia's reserves. The buyback is one of the steps announced by the government to reduce the servicing on its public debt, which would otherwise take up 36% of next year's budget — or three times as much as has been allocated to public investment at home.
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