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Colombia in the Eyes of Wall Street: International Recovery and Goals for Colombia

June 17, 2010


  • Oscar Iván Zuluaga, Minister of Finance (view presentation)
  • Ricardo Ávila, Director, Portafolio
  • Sergio Clavijo, President, ANIF (view first presentation) (view second presentation)
  • Juan Carlos Echeverry, Economic Advisor to Juan Manuel Santos
  • Rudolf Hommes, Consultant and former Minister of Finance
  • Salomon Kalmanovitz, Economic Advisor to Antanas Mockus
  • Lisandro Miguens, Managing Director, Senior Country Executive, JPMorgan (view presentation)
  • Armando Montenegro, Consultant and Ex-Director, DNP
  • Cristian Moreno, Head of Latin America Equity Research, LatAm Strategist, Grupo Santander (view presentation)
  • Ralph Scholtz, Managing Director, Project Finance, Latin America, BNP Paribas
  • Susan Segal, President & CEO, Americas Society and Council of the Americas (read remarks)
  • Roberto Steiner, Executive Director, Fedesarrollo (view presentation)


On June 17, 2010, the Americas Society/Council of the Americas hosted their fourteenth Bogota Conference, coorganized with ANIF and Fedesarrollo. The conference examined Colombia’s growth prospects as the country prepared to elect a new president on June 20. Local and international speakers talked about Colombia’s main challenges and opportunities after Uribe’s administration. Unemployment, economic growth, fiscal reforms and capital markets were just few of the topics discussed during the conference.

Economic growth, challenges, and opportunities

In his opening remarks, Finance Minister Oscar Iván Zuluaga discussed how the country has recovered faster than expected following the global financial downturn and why fiscal stimulus measures should be removed to allow more expansion for the private sector, the country’s growth engine. "The gradual withdrawal of the countercyclical fiscal policies is what will bring a message of calm to the markets and macroeconomic stability to the country," said Zuluaga during his presentation.

Colombia forecasted growth for this year rose to 3 percent from a previous target of 2.5 percent, while the predicted growth rate for next year is 4 percent for next year along with inflation at 3 percent. In addition, the government narrowed its 2010 national government fiscal deficit target to 4.4 percent of GDP from a previous target of 4.5 percent. Zuluaga also said that a new fiscal measure will be announced on July 7 to allow a better management of resources, in particular during a potential mining and hydrocarbon bonanza.

“Read My Lips: Taxes Needed”

Both ANIF’s Sergio Clavijo and Fedesarrollo’s Roberto Steiner recognized Colombia’s positive performance in the last decade but agreed it wasn’t enough to recover the investment grade lost 11 years ago. They proposed a series of fiscal and tax reforms, which they said should be the priority for the new government taking power on August 7. These reforms would only be successful if implemented in the first months of the new mandate, to rely on the political capital of the new president, said Clavijo and Steiner.

Steiner emphasized the need to raise concerns over Colombia’s fiscal position. “There was a golden opportunity to improve the fiscal situation and we let it pass,” he said. As a result, Clavijo insisted on a tax reform that would remove the current exemptions to capital and would expand the resource base increasing income tax from 33 to 34 percent and the value-added tax from 16 to 18 percent.

On a final note, both Steiner and Clavijo said that GDP growth in Colombia should be measured against Latin America. Colombia’s 3 percent growth expectation is among the lowest in the region and lower than the average growth between 2010 and 2015. Other countries such as Brazil and Peru are expected to see their economies grow by at least 5 percent. “As we stand, we are not on a good track to improve social development and we won’t be able to get back to former growth levels without proper reforms,” said Clavijo.

Panel on Colombia in the Eyes of Wall Street

In spite of having the best market returns worldwide in the past decade Grupo Santander’s Cristian Moreno said that Colombia’s equity markets are still quite small compared to other countries in the region. To illustrate the point, Moreno said that Colombia has 10.5 percent of the population in Latin America and a GDP equivalent to 8.1 percent of the region’s total. In contrast, Colombia accounts for 3.7 percent of all Latin American companies listed in the stock market and transaction volumes represent only a small 2.5 percent of the overall aggregate.

According to Moreno, a major opportunity exists for Colombian companies to fund expansion plans for tapping the market. Moreno said that a large number of Colombian companies could be listed but are not. Moreover, energy and financial sectors are overrepresented among the listed companies. JPMorgan’s Lisandro Miguens said that Colombian companies were too shy when it came to going public and expand. As foreign investors usually look for companies that are regional and world champions, Colombian companies would have to be more aggressive in the future.

Juan Carlos Echeverri: Proposed Reforms of the Next Administration

Days before the runoff election, Juan Carlos Echeverri, the newly appointed finance minister under President-elect Juan Manuel Santos, talked about reforms planned when Santos takes office on August 7. He first discussed plans to reform the health system to move toward universal health care. This reform would be tied to a law that will create incentives to formalize employment. With the largest informal economy in Latin America reaching—reaching levels as high as 40 percent—Echeverri said Colombia needs to create and formalize jobs to expand contributions to the health system.

Echeverri also said that the new government would present a constitutional reform to change the royalties’ regime and create a government fund modeled after Chile’s. This could lead to savings of up to 1 percent of GDP. The resources could help pay the external debt and further improve the credit rating of the country, Echeverri concluded.