Juan Pablo Córdoba explains what prevents foreign investment in Colombia – Financial Sector – Economy

Despite the fact that the Government is doing its job well in fiscal matters, with the tax reform, the commitment to comply with the fiscal rule and the 2023 Financial Plan, as well as with the gradual adjustment in fuel prices, their effort is not being reflected in a good environment for the marketsinvestors and businessmen in the country.

(Also read: Foreign investment: thanks to the first semester it was a record in 2022).

And one of the reasons is that the reform proposals, such as labor, health and pension, as well as some sectoral policies seem to go against this fiscal effort, to which is also added the lack of clarity and coherence in the model that the government wants to implement.

Says Juan Pablo Córdoba, president of the Colombian Stock Exchange (BVC), for whom this combination of circumstances is presenting a lot of uncertainty and a perception of high risk in the country, while preventing inflation from beginning to subside, pressured today, not because of the high costs of food, raw materials or logistical problems, but because of a sharp devaluation of our currency.

What is it that prevents the economy from looking good in the eyes of investors?

It is necessary to understand that in the short term there is an element that is descending to the entire population and that is that the prices of goods are very high and although we all hope that inflation will begin to drop soon, this will not be the case, since We are seeing it for April or May, so the Banco de la República will have to continue raising its rates and that will hit economic growth very hard. But one element that has not been discussed is that in the inflation conversation the devaluation is playing a very important role to the extent that 50 or 70 percent of the basket of goods depends on the devaluation. What is done by one side can be undone by another. So, no matter how much I want to control inflation, if I don’t do something so that the devaluation doesn’t continue galloping, all the efforts I make will be returned to me.

(Of interest: These are the foods that increased in price, according to Corabastos).

And where does this rampant devaluation come from…

From the lack of confidence and a bit of the message for the Government is that the devaluation has an enormous component of expectations, trust, credibility. Colombia is being devalued more than other countries in the region due to the noise that has been generated from the initiatives themselves, the messages from the Government and the confusion about the new economic model that wants to be implemented and that is manifesting itself in the exchange rate.

How to recover or build that trust and veracity?

I tell you straight up, we are adding gasoline to the fire through the loss of confidence. Measures such as intervening in public services, freezing tolls, not raising the price of diesel, with the aim of containing inflation, lose effectiveness via the exchange rate. The inflationary effect via devaluation is more costly for ordinary citizens due to the loss of confidence that this type of measure implies. Freezing the tolls has already ended a problem for us from now on because those contracts are already underfunded And fixing that mess is enormous from a fiscal point of view and a problem of credibility in the rules of the game for future concessions, and that also translates into less confidence and greater devaluation. The same happens with the rates of public services and the solution is not to control the exchange rate either. It is building a complete package that makes sense, that is coherent, that generates confidence and credibility that things are going to work well.

(You can read: Labor reform: list of changes that will touch you directly).

Where to start?

First of all, abandon the negative discourse of many government representatives, criticizing all the things that don’t work, all the bad things we have, and rather build coherent messages that allow them to reassure themselves that all the variables that favor the economy are on the table and all the dimensions of what is done as a State are understood, because the investors, those who finance the State, do not see clearly that there is an understanding of how all these elements interact. What I see is that there is a huge consensus on what (to do), such as reforms, but not on how (to do it).. I think that this conversation can be straightened out easily, because a public policy that is imposed will not be sustainable, but if it is built on consensus, it will have a future with majorities that will defend it.

How much did this hit investment?

Colombia should be the apple of the eye of the entire international community because it has everything so that in this situation that we are seeing it can be a preferred player in the world and we are not doing it because of the signals that we are sending from the country. On the issue of hydrocarbons, the saddest are those who believe in Colombia and seek to invest here, deepen employment, resources for communities, boosting exports. You need the policies and conditions for it. Minister Ocampo (José Antonio) has done a very judicious and responsible task in fiscal management, the tax reform may have elements that do not generate a total consensus, but managing to bring in new resources to finance expenses is something very prudent and responsible; the commitment to comply with the fiscal rule and the financial plan as well, this is responsible, the task is being done, but we lose that effort with everything else.

In this search for consensus, the Government does listen to the business community…

There is something that causes confusion and it is that the President (Petro) has been very repetitive in saying that ‘We listen, we make proposals, we are here to build together, we are open to dialogue’, but the feeling is that they are not listening to us. We do not see much spirit of conversation, or we are listened to but we are not taken into account, which is why it has been difficult to build consensus on what to do. We are interested in seeing Colombia do well and that the Government do well, but the proposals have to be supported by technical issues, studies, the wealth of knowledge that exists, both in the private and public sectors and in the university. All of us who have worked on these issues, if you tell us, come let’s build something that makes sense for the country, we are ready to help. And again, I think there’s a consensus on what you want to achieve and there’s a consensus on a lot of technical issues about how things can be done. So I think there is awareness that people want to help and are willing to contribute, what we need is perhaps an invitation.

Where is the message for young people?

The proposal that is made to them must be something that excites them, that allows them to dream that while in Colombia they will be able to develop, not only professionally and at work, but also as human beings, that they will be able to have a family to which they can provide sustenance and quality of life. life, with a thriving private sector that invests and creates employment, but I have not heard that speech that excites and we are talking about division, negative things, what does not work. It may take us 20 years, but the message in that vision of the country must be that we all fit. This revolution begins by improving the skills of children and young people, improving all education to meet the needs of a labor market that today demands better quality basic skills and technical training. But if we are exporting division, hate, everything negative, I think that speech would be the first thing to get out of the conversation and rather build one that excites.

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