draining development.pdf - Khazar University

Illicit Capital Flows and Money Laundering in Colombia 157Several public officials have proposed legal changes to allow the governmentto sell seized properties and return the proceeds if the ownerswin their cases. This would eliminate the problem of managing seizedproperty, but raises the issue of how the sale price is to be determined inenvironments of extremely imperfect markets.Capital Flows in and out of Colombia:The Role of the Illicit Drug IndustryColombia began to be a player in the international illegal drug industrysome 40 years ago. Since then, asset and money laundering and illegalcapital flows have been an important policy issue in the country. Before1970, policy debates related to illegal capital outflows existed, but theproblem did not have a high priority on the policy agenda. The outflowsthen were generally motivated by the foreign exchange control systemand the protectionist policies of the government, the fear of a left-wingpolitical revolution, and the desire to evade Colombian taxes.Since the illicit drug industry started to grow in Colombia, the debatesurrounding illegal capital flows and the related policies have been focusedon capital inflows, and the policy concern over capital outflows has beenminimal. This has been particularly the case in the last two decades, sincethe foreign exchange control regime was discarded and the economy wasopened up.Kleptocracy is primarily a local phenomenon in Colombia; it has beenlimited by the small size of local budgets and the productive activities fromwhich “commissions” may be illegally collected or benefit may be illegallydrawn from the associated public contracts. 16 The Colombian militaryhave never controlled the territory; they have relatively low social status,support elected governments, and play only a marginal political role. 17Colombia has not had a caudillo (leader) similar to the ones who, at times,have been typical in other Latin American countries and who have grosslyenriched themselves and taken huge amounts of wealth from the country. 18The most publicized corruption event in Colombia in the 1990s was thefunding of the 1994 presidential campaign of Ernesto Samper by the Calicartel to the tune of some US$8 million. Despite a national scandal and adetailed investigation, Samper was never accused of having personallyprofited from the money, although some of the funds were deposited in