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World Perspective | COLOMBIA

A Painful Withdrawal From Drug Money

With cartel's demise, Cali trades conspicuous consumption for rampant unemployment. Now city wants to clean up tarnished image as violent cocaine capital.


CALI, Colombia — Cali is for sale.

The luxury apartments lining the wide Paso Ancho boulevard, the vacant retail locales at the Cosmocentro shopping center, even the building that once housed a thriving fast-food restaurant at the entrance to the fashionable Garden City neighborhood--all are begging for buyers, renters or someone willing to trade for a location outside Cali.

Debris gathers in the parking lot of the block-long Children's World toy store that once sold the latest imported remote-controlled toys but now has been empty for months.

Porsches and Ferraris have disappeared from trendy 6th Avenue. Mazdas and Volkswagens drive straight past empty cafes and the shell of Harleymania, the Harley-Davidson dealership that once had a showroom full of the biggest, fastest motorcycles.

Even before the last alleged capo of the Cali cartel, Helmer "Pacho" Herrera, turned himself in to police earlier this week, the city that gave the drug organization its name was feeling the effects of the cartel's collapse.

During the early 1990s, Cali was the headquarters of the organization that dominated the world's cocaine trade. "Our society was infiltrated by drug traffickers," said Fabio Rodriguez, president of the Cali Chamber of Commerce. "There was a boom in construction because it was an easy way to launder money."


Drug traffickers also bought and furnished luxurious condominiums, dined in the best restaurants and imported sports cars and Toyota Land Cruisers. The money flowed through Cali's economy.

Then, last year, the government began a crackdown, offering rewards for those suspected of being the seven top Cali cartel leaders. With Herrera's surrender, all are now either in jail or dead.

Without them, this city of 1.8 million that had become addicted to laundered money and conspicuous consumption is suffering withdrawal pains exacerbated by a national economic downturn. The number of companies in concordata, a sort of Chapter 13 reorganization, is five times the level of previous years. Cali's unemployment rate has more than doubled in the past 18 months, reaching the highest level in eight years.

"All this unemployment is truly worrying," said Eduardo Fernandez de Soto, executive president of the Cali Business Committee. "These people could go bad and start stealing."

Nevertheless, Cali residents accept the end of the drug boom almost with relief. "What is important is that we are back to being who we are," Rodriguez said. "We are not rich. This boom had to end."

They are eager to shed their image as the world's drug capital and return to being an industrial city, known for the more than 80 multinational companies with manufacturing plants here. Business leaders speak of the need to export and to modernize the nearby Buenaventura port.

"We were in an unreal situation," said Luis Canon, editor of El Pais, the city's leading newspaper. "Now, prices have gone down and people can live."

Another benefit Canon noted is that the city has become more peaceful. "The psychology of violence has decreased," he said. "Drug traffickers used to play their music as loud as they wanted and go tearing through the streets in those Toyotas. Society tolerated the drug traffickers out of fear."

And some businesses are starting to recover. The Intercontinental Hotel in downtown Cali had become closely identified with drug traffickers, in part because the hotel has provided prosecutors with extensive records used in their investigation into corruption of politicians by narcotics dealers.


Drug traffickers used to rent salons and suites for their parties--just as other companies and families do, acknowledged Alvaro Rey Mora, the new manager of the hotel. Still, the hotel's banquet business is doing quite well without them, he said.

While the hotel's room occupation rate is low at 40%, the banquet business is booming this month, mainly because of social--rather than corporate--gatherings, he said. He has plans to build a new bar to accommodate the increase in customers.

"Now, because of the drug trade, everyone in the world knows where Cali is," said Rey Mora. "We have to take advantage of that but give the city a positive image."


Economics of Cali Crackdown

A peak of drug-trafficking activities lowered Cali's unemployment rate and brought a boom in construction and retail sales in the early 1990s. Since the dismantling of the Cali cartel, however, the city's economy has been devastated.


1990 1991 1992 1993 1994 1995 Unemployment rate 8.7% 8.9% 8.7% 7.7% 6.9% 10.8% Construction licenses issued 1,289 1,404 2,018 2,229 2,466 2,003 Retail sales growth na na 5.1% 4.9% 4.1% (-6.7)%

1996 Unemployment rate 14.9%* Construction licenses issued na Retail sales growth na


* through June

na=not available

Rate of Bad Loans Rises

The bad loan portfolio of Cali banks has increased also, a sign that businesses cannot repay money borrowed in more prosperous times.

Bad loans as a percentage of total loans:

May 1995: 4.8%

March 1996: 5.8%

Sources: Cali business organizations.

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