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Cablegate: Fallout From Pyramid Scheme Continues to Shake

VZCZCXYZ0000
PP RUEHWEB

DE RUEHBO #4263/01 3332228
ZNR UUUUU ZZH
P 282228Z NOV 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC PRIORITY 5776
INFO RUEHBR/AMEMBASSY BRASILIA 8534
RUEHCV/AMEMBASSY CARACAS 1373
RUEHZP/AMEMBASSY PANAMA 2729
RUEHLP/AMEMBASSY LA PAZ NOV LIMA 6787
RUEHQT/AMEMBASSY QUITO 7475
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS BOGOTA 004263

SENSITIVE
SIPDIS

WHA/AND FOR RMERRIN; TREASURY FOR MEWENS AND OFAC MSWANSON

E.O. 12958: N/A
TAGS: EFIN ECON KCRM SNAR PGOV CO
SUBJECT: FALLOUT FROM PYRAMID SCHEME CONTINUES TO SHAKE
COLOMBIA

REF: A. BOGOTA 4134
B. BOGOTA 4201
C. BOGOTA 4261

1. (SBU) SUMMARY: Nearly three weeks since the first of
Colombia's various pyramid schemes collapsed (ref A) and ten
days since the closure of the largest such alleged entity,
DMG (ref B), the economic, political, and social fallout
continue to shake Colombia. Officials from Colombia's
southern departments, where riots against the GOC by
defrauded victims continue, estimate that 480,000 of their
constituents had money invested in the schemes. As victims
continue to apply for GOC assistance, President Uribe
announced a new emergency decree directing Colombia's banking
sector to facilitate savings accounts for low-income
Colombians. Meanwhile, speculation has increased that
Finance Minister Zuluaga may resign under criticism for his
handling of the crisis. END SUMMARY.

Protests and Petitions Continue
-------------------------------

2. (SBU) Limited violence and demonstrations by victims of
various pyramid schemes as well as investors in DMG have
persisted in several southern cities in Colombia. In
particular, DMG clients have conducted a series of
well-organized rallies to blame the GOC for destroying the
company and instigating the consequent loss of investors'
"shares". In the latest unrest, local officials report that
at least 15 people were injured and more than 100 cars burned
in DMG-related protests in Putumayo on November 27. At the
same time, more than 42,000 victims have submitted
documentation to the GOC to get in line for any possible
restitution from seized DMG assets and health officials say
that calls to Colombia's national suicide hotline have spiked
36 percent in the last two weeks as a result of despondent
victims who have lost their savings.

Southern Governors Request Assistance
-------------------------------------

3. (SBU) Social tension and economic pressure have reached
the point that the departmental governors of Cauca, Narino,
Huila, and Putumayo requested the national government
establish an emergency fund to help bail out victims.
President Uribe has not publicly committed to the idea, but
has said that the GOC may need to include funds in the 2009
budget, currently under congressional debate, to address
fallout from the crisis. Preliminary economic data indicates
that commercial sales in the four departments have fallen 20
percent in the last three weeks. The governors estimate
200,000 families in Narino, 170,000 families in Putumayo,
60,000 families in Cauca, and 50,000 families in Huila were
invested in the schemes.

New Measure to Expand Formal Bank Accounts
------------------------------------------

4. (SBU) In response to continued calls for action, President
Uribe announced another emergency decree November 27 waiving
certain bank account fees for low-income Colombians and
directing Colombian banks to make formal sector savings
accounts easier to obtain. Numerous local financial experts,
as well as some pyramid scheme victims, blame the high cost
and difficult procedural steps in obtaining a formal savings
account in Colombia for driving low-income families to invest
their savings in institutions that ended up being pyramid
schemes. Others, including the President of Colombia's
Banking Association, Maria Mercedes de Cuellar, and National
Association of Financial Institutions (ANIF) President Sergio
Clavijo, dispute the assessment and suggested that the
mandatory removal of bank service charges represented a
worrying precedent of GOC intervention into the free market.

Speculation Swirls Around Finance Minister's Future
--------------------------------------------- ------

5. (SBU) Over the last week, Colombian media has featured
various reports that Finance Minister Zuluaga would submit
his resignation to President Uribe. While officials from the
Presidential Palace and Ministry of Finance have denied the
reports, Minister Zuluaga, and the financial offices that

report to him, such as Colombia's Tax Administration (DIAN)
and the Financial Superintendent's office, have borne much of
the public and congressional criticism for allowing the
pyramid schemes to proliferate unregulated. Contacts we have
spoken with are divided in their predictions of whether
Minister Zuluaga will remain. Meanwhile, House of
Representatives Secretary General Jesus Alfonso Rodriguez
told us pressure in Congress--including within the Uribe
coalition--to hold GOC officials accountable is growing, as
evidenced by the decision of two Conservative Party members
to abstain in the November 27 First Commission vote on a
possible third term for Uribe (ref C).
BROWNFIELD

© Scoop Media

 
 
 
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