COLOMBIA - Economy
Ricardo Ávila is the Editor-in-Chief of Portafolio, Colombia’s largest and most influential business daily, as well as the Deputy-Editor-in Chief (Opinion) of El Tiempo, the most important newspaper in Colombia. An economist by training, he holds a masters’ degree from the University of Pittsburgh, as well as a graduate certificate in Latin American Development. Earlier, Ávila was Editor-in-Chief of Cambio, at the time one of Colombia’s leading weeklies. A winner of the National Prize of Journalism Simón Bolívar, he has taught econometrics and economic journalism at Universidad Javeriana in Bogotá.
How is the Colombian economy raising its profile for international investors and markets?
Colombia continues to be one of the most attractive Latin American countries to invest in, thanks to its democratic, political, and institutional stability. The strength of our economy, the degree of investment granted by risk rating agencies, and the confidence that investors have in the country means the arrival of foreign resources is considerable when compared to other nations of similar development. The country has sound economic and fiscal management and a central bank independent of the government, which ensures responsible decision-making around key indicators such as inflation and interest rates.
What economic challenges will the new government have to address?
There are a number of challenges. The government must reduce the fiscal deficit from 3.1% in 2018 to 2.4% in 2019, according to what is established in the fiscal rule. It is one of the most complex tasks, because the Law of Financing aimed to raise an additional COP14 trillion (USD4.472 billion) to meet the needs established in the 2018 budget, but finally only standards that generate revenues of COP7.1 trillion (USD2.268 billion) were approved. Another challenge is to overcome an economic year that will surely be affected by the regional elections that will take place in the second quarter. 2019 could also be affected by the El Niño phenomenon, despite its moderate intensity. This has substantial consequences not just for the agricultural sector, but also the country’s energy grid, which is highly dependent on hydroelectric power. One of the major factors causing uncertainty is the volatility of the prices of oil and other exportable raw materials. Colombia must work hard to promote competitiveness, equity, formalization, and insertion in the fourth industrial revolution. Externally, the storm clouds come from the commercial war between the US and China, Brexit, and the Venezuelan political crisis. The government and the economic policy must increase investor confidence, including taking measures against corruption, insecurity, and legal protection of capital.
Looking to the future, where should investors and international markets invest in Colombia? What sectors or industries were previously overlooked?
Colombia has potential in several sectors, but it is evident that agro-industrial activity represents a great option due to its lag, for international investors, as well as tourism. There are also great possibilities in sectors such as renewable energy and unconventional hydrocarbons.
What are your expectations for the Colombian economy in the coming years?
2019 will be a better year than 2018 for the Colombian economy. GDP would grow between 3.3% and 3.6%. The lower figure comes from the IMF, and the higher figure comes from the Colombian government. Most of the country’s indicators are positive. Inflation will continue to be under control, there will be stability in interest rates, exports will continue to rise, several public works will take shape, and sectors such as industry, foreign trade, and tourism will boost the economy. The 6% increase in the minimum wage, which represents an improvement in the purchasing power of households, will stimulate domestic demand, thus slowing down the growing trend of unemployment. Consumer confidence has begun to recover, after the sharp fall generated by the text of the original project of the Financing Law. In foreign trade, exports could grow around 5% in 2019, approaching USD50,000 million; however, everything indicates that the deficit of the trade balance will continue to rise, due to the fact that imports also show an upward trend. 2019 also looks good on the hydrocarbons side, although uncertainty will remain over the evolution of international prices. These prices had a YoY downturn but have begun to recover. They are already above the average of USD65 per barrel, established in the government’s financial plan. In general, the Colombian economy is doing well, although it could be better.
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