External Crises Sharpen Domestic Focus: Cardenas

The QE stimulus unwind and debt ceiling talks in the US mean emerging economies can’t count on a favorable external environment, Colombian Finance Minister Mauricio Cardenas tells LatinFinance, particularly against a backdrop of lower commodity prices and reduced FDI potential. “I am fully convinced that we need to prioritize a more ambitious program of domestic investment to offset a weaker external environment. If we want to grow 4%-5% per year, we need to focus on the domestic side,” Cardenas says. The need to boost his country’s economic self-reliance was clear, as policy talks at the IMF’s annual gathering were overshadowed by the threat of a US sovereign default. “It would be naive 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 says. Foremost on the domestic agenda is a redoubling of efforts to boost investment in critical infrastructure. Cardenas says 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. Authorities aim to use proceeds from the sale of the government’s 57.7% stake in generator Isagen to stimulate private financing for the $25bn in “fourth generation” road concessions it is in the process of awarding. Colombia expects to receive more than $3bn for the stake, with proceeds going to the newly-created Fondo para el Desarrollo Nacional (FDN), which 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. “The strategy to deal with the external circumstances is to mobilize funds from one sector to another,” he says.