Volcanic eruption in Colombia cancels much of nation's economic progress

After a year of austerity measures, Colombia's economy was starting to show signs of recovery. But last week's devastating volcanic eruption -- which caused more than 23,000 deaths and left 25,000 people injured or homeless -- has canceled much of that progress. Some 50,000 acres were destroyed, including some of Colombia's richest agricultural lands and most modern farms, which were buried under an avalanche of mud. Also, 62,500 acres of potato crops in neighboring Boyac'a and Cundinamarca states are threatened by an ash fall carried by high winds from the crater of Nevado del Ruiz volcano.

If heavy rains do not occur within a week, the harvest could be lost, causing great hardship for the small, potato-dependent farmers in Boyac'a and reducing Colombia's total crop by 30 percent. The cost of living would also be affected, because the potato is the principal staple in the Colombian diet.

Damage in the northern state of Tolima, the area most affected by the volcanic landslides, is estimated at $400 million. The cost of reconstruction will be much higher. The government said Monday that Armero, which was destroyed in the avalanche, will be declared a national cemetery, since it is impossible to remove the heavy mud blanket that enveloped the town of 22,000 people.

Buried beneath the landslide are thousands of corpses as well as 200,000 sacks of coffee, 30,000 tons of fertilizer, 2,500 cars and trucks, and over 4,000 buildings.

The surrounding agricultural area is also covered in mud. Before the destruction it produced thousands of tons of rice, sorghum, peanuts, soya, and boasted some of the finest cattle in Colombia.

On the other side of Nevado del Ruiz, the coffee-growing center in the state of Caldas has been affected. Although the damage does not approach that of Armero, hundreds have been left homeless, and 308,000 sacks of coffee and 5,000 tons of fertilizer have been lost.

New settlements will need at least 5,000 houses to replace those destroyed. Expensive infrastructure will also have to be reconstructed in the central Andes, including roads, bridges, electrical lines, and water systems.

More than two dozen countries are sending aid consisting primarily of food, medicines, tents, and field hospitals for temporary relief work. But the Colombian government will have to shoulder the major costs of rebuilding and resettling.

The government has redirected funds designed for other regions to Tolima and Caldas. All nonessential projects are on hold in order to reconstruct the disaster area. The shift in priorities means that Colombians in other parts of the country will have to postpone their hopes of low-cost government housing or a new road.

The disaster also complicates Colombia's problems with its foreign bankers. While the government has met all its debt payments on time, and Colombia's economy is in better condition than that of bankrupt Peru or Bolivia, the country has been unable to obtain new foreign loans this year because of bankers' reluctance to sink more money into debt-ridden Latin America.

To reassure Colombia's creditors, President Belisario Betancur agreed to a tough austerity program proposed by the International Monetary Fund that cut off most imports, froze wages, slashed the national budget, and devalued the peso by nearly 50 percent. In return, the banks promised $1 billion in new loans which were to have been signed in October. At the last minute, however, they refused to go through with the deal unless Colombia agreed to more IMF-directed belt-tightening.

President Betancur, who played host to the first meeting of Latin American debtor nations in mid-1984, was furious about the new demands, which eliminate any hope of fulfilling a promise of government-sponsored improvements for the poorer classes during his last year in office. The austerity measures have improved Colombia's financial profile. But the price has been a steep industrial and agricultural recession. More than one-third of the labor force is unemployed or underemployed.

Real wages have dropped by as much as 8 percent in the past year. There is no government money for subsidies to cushion such hardship. Reconstruction costs add to the government's economic burden, postponing recovery. But the disaster may enable Colombia to obtain a more sympathetic hearing from foreign bankers.