From Colombia: Pyramid Schemes and the President

December 3, 2008

From Colombia: Pyramid Schemes and the President

The word Pyrámide (Pyramid) is on the lips of people throughout Colombia after the collapse of over 250 unregulated pyramid schemes defrauded thousands of people their savings, and may also cost President Alvaro Uribe his chance at a third consecutive term in office.

While I was in Colombia in July, it was common to see people lining up for long stretches first thing in the morning to buy into the pyramids, which promised 150% interest to investors. The schemes were operating openly until their collapse in mid-November.

"It didn't occur to any juridical or 'intelligence' organization to infiltrate the line-ups, hand over the money, receive the dividend, and serve as proof of the scheme. The DAS (Department of Security Administration) and the Casa de Nari (Presidential Palace) are much too busy spying on politicians and journalists to waste their time investigating narco-trafficking money launderers and other scammers," reads a stinging column published in El Tiempo in March.

According to the Polo Democratico Alternativo, an opposition party, the pyramids have affected every aspect of the economy in the departments of Nariño and Putumayo. The total amount of money lost in the schemes is believed to be upwards of $250,000,000. Many Colombians took out loans in order to buy-in.

The mid-November collapse of the pyramid schemes led to riots in various parts of the country, sparked off hunger strikes, and prompted the government to bring in a state of emergency. Three deaths have been attributed to the collapse.*

The government has announced that they will not be bailing out the scam. Those who invested will be left to their own devices this holiday season.

The scandal has badly hurt the government of President Alvaro Uribe. Having lost the support of Conservative members of congress from Nariño and Putumayo, it is no longer expected that Uribe will be able to get the votes necessary to make the constitutional changes required to allow him to stand for president a third consecutive time in 2010.

*Uribe brought in the state of emergency when the government became even less able to "control" Colombian social movements during the Minga and the strike of the sugar cane workers. The pyramid scheme was more like the "icing on the cake" for the government, that also illustrates the economic element of the crisis in Colombia.

"On the couch" cartoon by Matador.