LatinFinance - March/April 2016 - 62

year's ranking.
The country was heavily affected by declining oil prices in 2015. It saw a significant
drop in its GDP growth from 4.6% in 2014
to 3.1% last year while inflation rose to 6.8%
from 2.9% in 2014. State-owned oil companies such as Ecopetrol and Pacific E&P are
the country's biggest source of export and
tax revenues and had to cut their spending
by at least 26% and 27%, respectively.
However, analysts praised Cardenas'
for his fiscal responsibility, pointing to
attempts to contain the fall-out from low
oil prices and the budget shortfall through
tax reform and amending the country's oil
royalty system.
Early last year, Colombia released a
proposal targeted at raising investment in
existing oil fields by allowing oil companies
to treat extra crude as new discoveries,
thus qualifying them for lower taxes. The
sovereign also wants to incentivize exploration by extending the duration of concessions and switching fixed-rate royalties to a
sliding scale.

"I think the use of available resources in
Colombia has been efficient and beneficial
for the country," says Credicorp Capital's
Velandia. "These reforms, in some way,
helped the economy to have a soft landing of sorts, something that will probably
continue into 2016."
Rising star
Several economists characterize the finance
ministry of Panama, led by Dulcidio De La

DANIEL VELANDIA, CREDICORP

"THESE REFORMS, IN
SOME WAY, HELPED
[COLOMBIA] HAVE A
SOFT LANDING
OF SORTS, SOMETHING
THAT WILL PROBABLY
CONTINUE INTO 2016"

So we're addressing this by reducing spending and I think the market is
acknowledging that.
LF: What kind of activity are you seeing in foreign direct
investment?
LV: 2015 was a very good year. It's interesting that it's a mix. It's not only
just one sector. Whereas the auto industry is creating a lot of investment.
All of the major car companies already have major facilities in Mexico.
Aerospace is attracting a lot of interest. We also see food and beverage.
Telecom is big. For instance, AT&T is deploying several billions of dollars
of capital acquiring assets and new investments in technology to create a
network that will be compatible and could be seamlessly integrated with
the US network. So creating a true North American platform for telecom.
It's a wide range of sectors. Alongside telecom and aerospace is going
to be energy. Already the contracts awarded, which are not the biggest,
will create about $7 billion in FDI and this will continue.
LF: Where is investment coming from?
LV: It's coming from everywhere. Of course, the biggest investor in
Mexico is the US. The US is our biggest partner for trade, for financing
and for foreign direct investment. We are also attracting significant
investments from Europe and from Asia. Particularly Japan is a big investor in Mexico and there are many companies that have a long history in
Mexico, from Europe and Japan, and new companies that haven't been
here before.
For instance, just in the last quarter, we authorized four new banks
in Mexico. One was Chinese, one was Japanese, one Korean and one
Spanish bank. So we're seeing investment in many sectors, in this case
finance, coming from different countries. It's very encouraging given the

62 L ATINFINA NCE.COM - March/April 2016

Guardia, as the star of Central America.
The country had 5.9% GDP growth in
2015. While the figure is a decrease from
2014 at 6.2%, and from 2013 at 8.4%, it's still
significantly higher than the regional average contraction of 0.9% for 2015, according
to estimates from the World Bank. Panama's inflation rate fell to 2.7% last year.
Panama's dollarized, service-driven
economy translates to lower exposure to
changes in commodities prices, giving it
an advantage over other countries that
are struggling with low-priced exports
and a strengthening dollar. Additionally,
Panama has successfully taken steps to
clear its name from the Financial Action
Task Force's "grey list," which comprises
countries that don't implement sufficient
policies to combat money laundering.
The Paris-based intergovernmental
organization, which had placed Panama
on the list in 2014, removed the country in
February. LF
Additional reporting by Sara Rosner

current environment in the markets and in the global economy.
LF: What are the biggest challenges for Mexico and for Mexican corporates in the next 12-18 months?
LV: It's going to be financial markets. The conditions can change. The
US interest rates and Fed action are going to be a challenge. If rates go up
in the US, it's because the US is growing and that's very good for Mexico.
But still, on the financial side it presents a challenge.
All the uncertainty that's coming from other emerging economies,
specifically China, is creating financial unrest. Our job is to provide
conditions of certainty and stability, to be very consistent and disciplined, particularly with our public finances, and to make sure we can
go through these uncertain conditions with stability and by creating
the fundamentals for growth.
LF: What's your take on the impact of US rate hikes?
LV: Our central bank decided to act, at least in the first hike, in
lock-step. The day after the Fed increased its rate for the first time,
the Bank of Mexico did the same and the same amount. That's the
first sentiment. Our central bank is very sensitive to what the Fed
does, I cannot anticipate that the lock-step will continue every time.
But certainly, relative monetary policy and relative monetary conditions relative to the US are going to a fundamental driver to Mexican
monetary policy.
We have to acknowledge that as rates go up in the US, the flow of
capital to emerging markets is going to diminish. It's not going to be as
abundant as it was a few years ago or a few months ago. We need to
diminish our financing needs, that's why we're cutting the deficit, that's
why we're cutting the expenditure to make sure our financing needs are
something sustainable under these market conditions. LF

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