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
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 generator Isagen.
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 side.”
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
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.
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.
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.
more and more convinced that this is the last chance markets have to buy cheap
dollars,” he said.
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 stimulus program.
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 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.
government is in the process of auctioning $25 billion in road concessions, a
package known as the “fourth generation.”
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 markets.
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
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 said.LF