LatinFinance - March/April 2015 - 23

SCORECARD
FINANCE
MINISTRIES

A mix of orthodox macroeconomic policy and pre-emptive
tax-raising measures held investors' confidence in the sustainability
of Colombia's growth prospects. By Phil Thornton

Glimmers in the gloom

country in the region. It is likely
to slow this year, but finance
minister Mauricio Cárdenas
expects growth of around 4%.
His administration acted "pre-

Peru

Miguel Castilla y Alonso Segura

Paraguay

Germán Rojas*

Chile

Alberto Arenas

* Resigned for personal reasons on 2 January 2015.

Source: Acciona

or Latin America, 2014 was a year to forget. Economic expansion slowed sharply
to just 0.8% as China's cooling economy and declining commodity prices took their toll on
many of the star players, both large and small.
Regional growth was less than a third of that in 2013 and was the slowest in more than 13
years. Yet as can often be seen in Latin America, there was a marked divergence between
those policymakers that were determined to drive through fiscal and economic reforms, and
those that have been less quick off the mark.
The difficulties they faced are clear. The dramatic plunge in oil prices put extreme pressure
on the fiscal balances of the region's petroleum-exporters. "The commodity cycle is a huge
issue for the region," says Brian Coulton, emerging markets strategist at Legal & General
Investment Management.
"There are probably few countries that are not affected in some profound way by the
commodity price declines, so responding to that has separated the men from the boys."
These hurdles provided the backdrop to LatinFinance's 2015 Finance Ministry Scorecard.
It listens to the views of ratings agencies analysts, private-sector credit analysts, and
independent economists on ministries' performance across several areas, including fiscal
management, building sustainable economic growth and contributing to controlled inflation.
It also takes into account ministries' transparency and clarity in communications with
markets, independence and institutional strength.
This year, Colombia's finance ministry tops the scorecard, heading the list of countries
receiving positive feedback, along with Mexico, Peru, Paraguay and Chile.
Colombia's macroeconomic
performance makes the ministry
Preemptive success
stand out. The economy is
Finance ministry scorecard, 2015
expected to post GDP growth
Country
Minister
of 4.8% in 2014, according to
1
Colombia
Mauricio Cárdenas
the IMF, making it the fastest2
Mexico
Luis Videgaray
growing economy of any major

emptively" with changes in fiscal policy
to deal with the impact of weakening oil
prices. "We always treated high commodity
prices as a temporary phenomenon and
[knew] that we had to prepare for lower
commodity prices," he tells LatinFinance.
"We are accommodating the lower oil
rents with lower expenditure. The idea was
to switch the budget in a way that would
increase investment in those sectors with
the highest multiplier effects, in terms of
GDP and employment, and that meant
putting a heavy emphasis on housing and
infrastructure."
Cárdenas says that move translated into
a record rate of investment growth worth
30% of GDP in 2014. At the same time,
Colombia attracted record levels of foreign
investment in the form of both FDI and
portfolio assets. Surveys consistently show
high levels of confidence in the economic
outlook by consumers, businesses and
investors, he says. This is matched by
confidence from external investors.
A year ago, JPMorgan increased
Colombia's weighting in two of its emerging
market debt indices, citing "improved
transparency and accessibility for
international investors". In June, Moody's
upgraded Colombia's rating to Baa2 from
Baa3 and changed the outlook from stable
to positive on the back of what it called
"sound fiscal management that has led to
moderate fiscal deficits". That same month,
the IMF renewed its $2.7 billion flexible
credit line.
Cárdenas says Colombia benefits from
strong investor confidence as a result of
solid economic management: "We have
been very systematic about the need to
reduce the fiscal deficit, public debt and
inflation. We are at the opposite end [of
the spectrum] from populism. We wanted
to send a message to the market that fiscal
responsibility, financial stability and low
inflation are the anchors of economic
management in Colombia."
In December, he pushed a new tax bill

March/April 2015 - L ATINFINA NCE.COM 23

http://www.LATINFINANCE.COM

LatinFinance - March/April 2015

Table of Contents for the Digital Edition of LatinFinance - March/April 2015