| Summary: | Colombia has tolerated for almost fifty years the oldest guerrilla movements in the region, but at the same Colombia has tolerated for almost fifty years the oldest guerrilla movements in the region, but at the same puzzle is to establish which of the following variables; guerrilla violence, illicit drug trafficking, or the 1991 Constitution, have most affected economic stability in the last half of 1990s. The thesis will argue: (1) Guerrilla violence is the most important variable that impacts Colombia's economy, causing severe internal and external migration. Kidnapping, extortion, and infrastructure attacks represent the loss of million of dollars in economic damages. (2) The illicit drug trafficking is the second most important variable that has affected Colombia's economy, causing an economic domestic boom during the period of the Cali and Medellin drug-cartels, infiltrating the economy with money laundering and fictitious business. (3) The 1991 Constitution established many new economic responsibilities at the state level, which aggravated the state fiscal crisis. The separation of taxation and spending among different levels of government has fueled severe problems of fiscal imbalance, because the bulk of tax revenues is collected by the Central Government but spent at municipal levels.
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