LatinFinance - November/December 2016 - 52

PARTING
SHOT
Despite losing the referendum on its peace agreement, Colombia's government maintains the
political capital to undertake necessary reforms,
argues Mauricio Cárdenas

Pushing forward
The result of the referendum has been a disappointment and
it's impossible not to acknowledge that. We were very optimistic
about peace. We were really looking forward to that plebiscite. But
we need to be pragmatic, and we have to be flexible. This is what
President Santos has been doing. He sat with [former Colombian
President and opponent of the peace agreement Álvaro] Uribe and
Uribe appointed three people to a committee to discuss with the
government the details of the agreement. President Santos also
appointed three people. They're going to start discussing with the
idea of introducing some changes to the agreement that will make
them acceptable to opposition.
The Nobel Peace Prize is also sending President Santos the
message from the international community that he cannot give up.
So I am optimistic that this project will succeed.
Regarding political capital and the ability of the government to
pass legislation and having a working majority in congress, all of that
was put to a test recently when I went to the floor of the senate to get
the approval of a very complicated and challenging bill on raising
alcohol taxes. We got that approval - the majority did support us,
despite the fact that the opposition left the plenary. But we were
still able to have the votes, and the quorum, which is a good sign,
especially for a complicated law.
If we don't get the tax reform passed we may lose our rating and
we may also have to cut very sensitive social programs. We may also
put at risk the competitiveness of our economy because one of the
aspects of the reform is to rebalance the tax structure and reduce
taxes for employers, corporations. There are too many things that
could happen if the reform is not approved. So that's why we are
fully committed.
Colombia has always been responsible and has always done its
homework. We'll continue to do that. Well make sure the reform
is passed. Perhaps it's not going to be exactly the reform that we're
submitting: there's always room for negotiation, there's always
room for adjustments.
But we'll get the reform that allows us to improve the
competitiveness of our economy by lowering taxes on corporations,
that generates revenues, so that we comply with the fiscal rule.
And the other big objective here is to simplify our tax code, it's too
complex. We want to make sure that it gets simpler.
Keeping the triple-B rating is our north star. It's what we're aiming

52 L ATINFINA NCE.COM - November/December 2016

for. It's our major objective.
We do that because we
know it's good for cutting
our interest payments so
that we can save money to
invest in social programs
and infrastructure. But it's
also a way of reassuring
investors that the economy
will continue to be well
managed, that we have
responsible policies. So we
put a lot of emphasis on the
triple-B rating as a signal to
investors to reassure them.
We've been adjusting
our economy in a direction
that is consistent with the
triple-B rating. If you look
at recent trends in the
current account deficit, in
terms of inflation, in terms
of the debt to GDP ratio, I
think the worst part of the
adjustment, of the shock,
is over. We've done most
of the homework. We still
have the last stretch but we have done a lot so far.
To those who are expecting peace, I would tell them that it's going
to take a bit longer than we initially thought. But that the upside of
peace is still there. One thing is clear to me: Colombians don't want to
go back to the conflict. They don't want to go back to high homicide
rates or high kidnapping rates or extortion. The country is unified
around this idea of making sure that what we have seen in the last
couple of years, which have been very quiet from the conflict point of
view, remains so. LF

"KEEPING THE
TRIPLE-B RATING IS
OUR NORTH STAR.
IT'S OUR MAJOR
OBJECTIVE"

Mauricio Cárdenas is the minister of finance and public credit of
Colombia. This is an edited transcript of comments in an interview with
Katie Llanos-Small.
http://www.LATINFINANCE.COM
Table of Contents for the Digital Edition of LatinFinance - November/December 2016
