LatinFinance - November/December 2013 - 64

parting
shot
If Colombia is to avoid slower growth it must boost domestic investment to offset a weakening external environment, says its finance minister Mauricio Cárdenas

Seize the moment
We are moving between two extremes that are equally harmful.
a few years ago we were exaggerating the expansion in emerging
market economies, suggesting that they would become the new
engines of the global economy, that the rate of expansion was
unstoppable. But it is equally an exaggeration to say that the
emerging markets are in a process of decline and that a more
pessimistic view should substitute for the previous one. the reality is
somewhere in between. emerging markets are still growing at a very
healthy rate, roughly 4.2%.
However, having witnessed, for example, the gridlock in
Washington in october, i am more convinced than ever that we
have to put all our emphasis on domestic investment to offset the
weakening external side of the economy.
the external sector has become weaker because of lower
commodity prices, higher interest rates in the US, and less capital
flows to emerging market economies. We must offset that through
a more aggressive and ambitious program of domestic investment,
specifically in infrastructure. if we don't do it, we won't keep
growing at the same rate.
there are two major initiatives for long-term growth in colombia:
infrastructure and the peace process.
in terms of infrastructure, we have been preparing the plans for
three years and we are now ready to begin the tender process for $25
billion in projects. that will add 0.7% to colombia's potential GDP
growth rate per year and will put colombia on a new trajectory of
5.4% annual GDP growth.
of that $25 billion program, 70% has to be financed. the question
is whether the domestic banks of colombia are able raise funds for
these projects, or whether that's too much risk to absorb. the state
may need to provide subordinated loans or credit enhancements so
that the commercial banks are willing to lend.
that is where the creation of the new development bank, the
Financiera de Desarrollo Nacional (fDn), is crucial. it will provide
some of the lending for the projects with funds that will come from
the privatization of power generation company isagen. the fund
is going to extend loans or credit guarantees so that banks finance
these projects or that eventually, through a credit enhancement, the
projects can be financed through bonds.
We think we could raise at least $3 billion from the sale of isagen.
that is a top priority. We need to overcome all the obstacles to the

64 l atinfina nce.com - November/December 2013

privatization, legal and political.
But it is in the best interest of
the country. We can accomplish
this in four to five months.
the strategy to deal with the
new external circumstances
we are facing is to mobilize
money from one sector to
another. So we are mobilizing
$3 billion from the power sector
to the transportation sector,
not as budgetary support for
these projects but to provide
the financing to make these
projects bankable.
We should now also open
the tender processes for these
so-called 4G road concessions.
the agencia nacional de
infraestructura (ani) should
begin the bidding process.
the peace process is
more complicated and is not
entirely in our hands. We are
negotiating with a very difficult
counterpart. But the economic
cost of a failure of the peace
talks would be limited: we have not made any concessions. Success,
on conservative estimates, would mean the possibility of unleashing
an extra percentage point of growth in colombia. i am cautiously
optimistic. However, the success of the colombian economy is not
contingent on the success of the peace talks.
our tax reform will also bring more productivity, to strengthen the
domestic demand to offset the reduction in external demand.
fortunately prices for oil, our largest export, have remained high.
But we have to be prepared because, although we think prices will
remain stable, they can come down any time. LF

The sTraTegy
To deal wITh
The new
exTernal CIrCumsTanCes we
are faCIng Is To
mobIlIze money
from one seCTor To anoTher

Mauricio Cárdenas is the finance minister of Colombia. He was
interviewed by Taimur Ahmad.

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LatinFinance - November/December 2013

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