Cárdenas: Colombia to target “more ambitious” investment program to offset global weakness
Colombia must redouble efforts to boost domestic growth through infrastructure investment as global conditions remain unfavorable, its finance minister says
Colombia’s finance minister
Mauricio Cárdenas has said he is more convinced than
ever of the need to boost his country’s economic
self-reliance, as policy talks at the IMF’s annual
gathering were overshadowed by global uncertainty and the
threat of a US sovereign default.
told LatinFinance in an interview that he
will redouble efforts to boost investment in critical
infrastructure, including by advancing the sale of power
"I am fully convinced that we need to
prioritize a more ambitious program of domestic investment to
offset a weaker external environment," he said. "If we want to
grow 4% to 5% per year, we need to focus on the domestic
The prospect of tighter global liquidity
and continued political gridlock in Washington mean emerging
economies can no longer count on a favorable external
environment, especially against a backdrop of lower commodity
prices, Cárdenas said.
"It would be naïve to ask for the US
authorities to incorporate reactions of other countries [into
their decisions]. At the end of the day, decisions will be made
with other priorities in mind," he said.
Colombia’s potential growth
rate could hit 6.0% if talks with FARC rebels prove successful
and lead to an economic "peace dividend" and if targeted
infrastructure investments proceed to plan, he said.
Cárdenas insisted that Colombia is
well prepared for external shocks. Oil prices have remained
high relative to other falling commodities, to the advantage of
the oil-producing nation. However, he said that a strengthening
US dollar will pose a challenge for emerging economies.
"I’m more and more convinced
that this is the last chance markets have to buy cheap
dollars," he said.
But he added that financial markets have
overreacted to a growth slowdown across the emerging world,
following fears that the US Federal Reserve would pare back its
"Markets may have exaggerated the extent
to which emerging markets would be the new engine of global
growth, but it is equally an exaggeration to say emerging
markets are in a process of decline. The reality is somewhere
in between," he said.
Cárdenas said the equilibrium
exchange rate for Colombia’s currency was between
1,900 to1,950 pesos to the dollar, following an
"excessive" high last year of 1,750. The peso was at
around 1,880 per dollar Monday.
The government is in the process of
auctioning $25 billion in road concessions, a package known as
the "fourth generation."
It plans to help stimulate private
financing for the winning bidders. Authorities also aim to use
proceeds from the sale of the state’s stake in
generator Isagen to support infrastructure funding. Roughly 75%
of the road projects’ costs will be debt financed,
and builders will need the help of the bond and bank
Colombia expects to receive more than $3
billion for the 57.7% stake, and the proceeds will support the
newly-created Fondo para el Desarrollo Nacional (FDN) fund,
Cárdenas said. The fund can offer subordinated debt,
guarantees and other credit enhancements.
The minister said the goal is an entity in
the mold of Mexico’s Fonadin, rather than Brazil's
BNDES, as FDN is "not going to be a development bank that
subsidizes projects." The government’s goal had
been to award the first concessions this year.
"The strategy to deal with the external circumstances is
to mobilize funds from one sector to another," Cárdenas