Economic pain spreads to Colombian town that rode Latin America's oil boom

Energy Associated Press

Soaring oil prices the past decade transformed this rural backwater into Colombia's richest city as nearby fields pumped black gold, drawing new businesses, international pop stars and vanity art projects such as the biblical-themed arch that towers over these sweltering grasslands.

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Now, crashing crude prices have the 45,000 residents of Puerto Gaitan bracing for a big fall, or already packing their bags. Many are questioning how the windfall was spent.

"Things are going badly but we haven't touched bottom yet," said Edgar Candelo, who lost his job driving a tanker at the Rubiales oil field, which pumps out a quarter of Colombia's crude. With no prospects in sight, the 46-year-old says he is leaving Puerto Gaitan for a job at half the pay hundreds of miles away.

Similar upheaval is taking place across much of Latin America, where oil prices have fallen by nearly half since September, threatening to pull the rug out from under a decade-long economic boom. And the region's leftist governments, which used the bonanza to lavish spending on social programs that entrenched them in power, now find themselves in the position of having to slash budgets amid rising social tensions.

Across the region, from the shale deposits of Patagonia to Mexico, where the government is rolling out a historic oil reform, nervousness is widespread. Drilling projects that proliferated over the past decade are being shelved and the Bank of America last month cut to 1.3 percent from 1.8 percent its forecast for the region's economic growth this year.

In Colombia, oil production almost doubled over the past seven years. Energy companies rushed into previously-off-limits areas after they were cleared of guerrillas and paramilitary fighters by U.S.-trained security forces. A net oil importer not too long ago, Colombia is now the fifth biggest supplier to the U.S. Driven by near-record oil production, its GDP expanded 4.8 percent last year — the fastest pace among Latin America's major economies.

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Puerto Gaitan was at the epicenter of the boom.

As royalties poured in, the town's budget ballooned by a factor of 100 and a frenzy of construction projects were carried out: state-of-the-art schools, one of Colombia's largest libraries and an acoustically-pristine amphitheater. The population of the town tripled, and salsa singer Marc Anthony and rapper Daddy Yankee livened up blowout parties in what for decades had been a sleepy ranching outpost a six-hour drive east of Bogota.

But the biggest symbol of the new wealth, and now waste, that defined the era is the four-story concrete arch at Puerto Gaitan's entrance, known as the "Door to Paradise." Costing over $1 million, it evokes the biblical tale of Adam and Eve in garish colors.

Mayor Edgar Humberto Silva defends how the boom money was spent, but acknowledges the future is bleak. Union leaders say almost 7,000 workers have lost their jobs in recent weeks as Pacific Rubiales all but froze investments in the country's biggest field. Shares of the Toronto-listed company have dropped by more than half since December.

Nationwide, the Labor Ministry estimates that some 25,000 oil workers, a quarter of the industry's workforce, are at risk of losing their jobs. The government is also raising taxes as the decline in oil prices drives a hole in the budget. As prices of oil rose, the country's dependency on energy exports has grown to that point that 15 percent of all government spending is now funded by crude.

In Puerto Gaitan, the signs of desperation are everywhere, from for sale signs on shuttered stores to an empty lot that just a year ago was being readied for what was to have been the fourth Best Western hotel in Colombia.

Hundreds of unemployed rough necks have pulled up stakes along with the prostitutes that filled once-thriving brothels. Long-term residents fear a return of illegal armed groups that once subjected them to extortion.

Those lucky enough still to have jobs are tight-fisting their paychecks and have all but abandoned the late-afternoon ritual of throwing back cold beers to break the suffocating heat. Lady Rubio, a 27-year-old bar owner, has had to close one of the watering holes she ran in the town.

"I used to sell 300 beers a day and now, with luck, only 60," said Rubio, who is giving herself a few more months before joining the exodus. "The economy is devastated and everyone is depressed and looking to leave."

Colombia isn't the only country in the line of fire.

By far the most pain is felt in Venezuela, whose socialist government earns 95 percent of its export income from oil. In recent months, lines at supermarkets have grown and shortages have worsened as the government, trying to avert a default, tightens its grip on scarce dollars needed to import everything from food to auto parts.

Also at risk, analysts say, is OPEC member Ecuador, which last month secured a $7.5 billion credit line from China to cope with the crisis.

But Puerto Gaitan's mayor sees a possible positive side to all the duress.

"In the long run this could be a good thing because oil has made us all idiots," said Silva, who wants to make up for the lost income by promoting river cruises to see the region's abundant birdlife and pink, freshwater dolphins. Judging by the empty boats hitched to the pier, the hoped-for flood of tourists may be slow to materialize.

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Follow Jacobo Garcia on Twitter: @jacobogg

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AP Writer Joshua Goodman contributed to this report from Bogota.