Latin Finance - September/October 2014 - 74

COLOMBIA
ECONOMY

As growth booms, Colombia's newly reappointed finance minister says
the benefits will extend over the long term. By Lucien Chauvin

Looking up

olombia has taken
the lead among Latin America's large
market economies, chalking up one of the
strongest expansions in the region in the
first half of this year. It is also the only large
market economy in the region to have its
growth forecasts revised upwards this year.
The UN Economic Commission for Latin
America and the Caribbean (ECLAC) in early August revised down its regional forecast
for the year, dropping it to 2.2% from 2.7%.
But the commission increased its forecast
for Colombia by 50 basis points, to 5%.
"If any country in Latin America has the
possibility of achieving 5% growth this year,
it is Colombia," says Jonathan Lemco, sovereign analyst at US asset manager Vanguard.
The government of President Juan
Manuel Santos, newly reelected in June,
does not just want to guarantee 5% growth
this year. It also has mapped out a strategy
aimed at ensuring that rate is met throughout Santos' second four-year term, which
began August 7, and into the next decade.
"The main objective, the overriding
goal, is to keep economic growth at a rate of
close to 5% or higher during the next four
years," Finance and Public Credit Minister
Mauricio Cárdenas told LatinFinance in
early August.
"Colombia has to have a clear goal to
become a developed country, and we have
to make sure we are on that path. I am not

74 L ATINFINA NCE.COM - September/October 2014

Getting things going in the short run will
require a good deal of political work to push
tax reform through the legislature. The
administration will also need
to keep financial resources
flowing to important industries, particularly oil, which is a
critical source of foreign investment and export earnings.
Special finesse will be
needed to secure a lasting
peace agreement with armed
insurgents, especially the
Revolutionary Armed Forces of
Colombia (FARC). Negotiations
with the FARC, which started
in February 2012, could end a
conflict that began in 1964.
A peace deal would not only
free public resources to invest
in other sectors, such as transportation and infrastructure.
It would also open to investment areas of the country that
have been unsafe for decades,
and stop FARC's attacks against
energy infrastructure.
Colombia is the fourth-largest oil producer in Latin America, extracting slightly
more than one million barrels per day.
But reserves will run out in less than seven
years if the present production rate continues without new discoveries.
©REUTERS

C

MAN WITH A PLAN: Colombia's finance
minister, Mauricio Cárdenas, hopes tax
reform and investment in the oil sector
will help sustain growth

MAURICIO CÁRDENAS, FINANCE MINISTRY

"COLOMBIA HAS TO
HAVE A CLEAR GOAL
TO BECOME A
DEVELOPED COUNTRY"
saying we are going to reach development
in four years, but I think it is an objective
that we can obtain in 12 years. In 12 years,
Colombia could have developed-country
status, meaning per-capita income of at
least $20,000, and the eradication of absolute poverty," he says.

Protecting revenues
Cárdenas recognizes that keeping oil revenues high is essential to sustain economic
growth - oil accounts for 20% of fiscal revenue. "We need to make sure that we are
able to sustain or increase production," he
says. "If there are no major discoveries, we
would lose around one percentage point of
http://www.LATINFINANCE.COM
Latin Finance - September/October 2014

Table of Contents for the Digital Edition of Latin Finance - September/October 2014
