Interview: Iván Duque
How would you describe your administration’s economic priorities leading up to 2022?
IVÁN DUQUE: In a context marked by a sharp slowdown in global GDP growth, the worst migratory crisis ever experienced in Latin America and following a year with GDP expansion of 2.6%, the Colombian economy is expected to grow by between 3.4% and 3.6% in 2019 – above regional projections and the world average. On the fiscal front this administration is fully committed to the “fiscal rule”, which will see the national government cut the deficit from 3.1% of GDP in 2018 to 2.4% in 2019, in line with levels set by the state committee.
Moving forward, the biggest challenge for our economy is to achieve GDP growth levels of 4-5% over the coming two decades. Only then can we ensure Colombia’s reaches GDP per capita of over $25,000 annually, positioning us among high-income countries. In pursuit of this goal, the recently passed Economic Reactivation Law promotes entrepreneurship, investment, productivity and formalisation through a strong reduction in the fiscal burden and the institution of a more progressive tax regime.
Moreover, the National Development Plan 2018-22 (Plan Nacional de Desarrollo, PND) is our roadmap for the four-year term. It includes ambitious social investment targets of up to COP1.1trn ($376.2m) during this period. Our goals include lifting 1.5m people out of extreme poverty and 2.9m out of poverty, while expanding the middle class, creating 1.6m jobs and reducing unemployment to 7.9%. The biggest challenge of the PND is to ensure productivity gains act as the main source of growth in the coming years by increasing it from 0.65% to 1.1% of GDP, and raising investment from 22% to 27% of GDP so growth can reach 4.5% in 2022.
Also under the PND is COP37.1trn ($12.7bn) set aside for the implementation of the peace treaty, which will be channelled through development programmes with a territorial focus. Moreover, we seek to balance the burden and improve the income of regions where extractive industries are located through reforming the royalties payment regime.
Which sectors are expected to receive the most support from government?
DUQUE: The Economic Reactivation Law was launched to promote sectors that have showed low performance in recent years and have the potential to improve, such as construction, agriculture, mining and energy, the creative economy and tourism. The plan was welcomed by businesspeople and investors as it is key to promoting private enterprise, the free market, innovation, fiscal austerity and formalisation.
First, we looked to reactivate the construction sector by identifying the challenges facing the Fourth Generation road infrastructure programme. We established policies that marked the new direction of mega-projects and achieved quick wins that gave new life to these initiatives, such as the co-investment platform for infrastructure developed by Financiera de Desarrollo Nacional and the country’s pension fund administrator.
We have moved forward with the Colombia Rural programme for the expansion and maintenance of rural roads in the country. Through this we hope to make the connections that are needed for people living in these areas. The initiative has a budget of around COP4trn ($1.4bn) for 2019-23, and it prioritises corridors that improve rural productivity in all regions.
Other strategies complement the aim to invigorate the development and productivity of Colombia’s rural sector in order to overcome the lack of public and private investment that has impeded both agro-industrial and non-agro-industrial potential. Goals for social inclusion, productivity, the support of women and innovation are integral to Colombia’s rural plan.
Another initiative is Reactivate Colombia, with a budget of COP2.35trn ($803.7m). This is to finance projects in the creative and cultural industries; secondary and tertiary roads; social infrastructure; renewable energy for the regions; energy efficiency programmes; and water and sanitary infrastructure. Tourism is also a focus under the Economic Reactivation Law in order to meet the objective of the sector becoming a viable and profitable option for sustainable development.
Furthermore, we are looking to improve the business environment and reduce costs for companies’ growth, which will enable us to increase formalisation, raise demand for qualified human capital, and strengthen micro, small and medium-sized enterprises (MSMEs). This, coupled with initiatives to improve housing, mining and alternative energies, has seen the GDP growth rate move from 1.4% in 2017 to 2.7% in the second half of 2018, and to 2.9% in the first quarter of 2019, leading the world’s main multilateral organisations to expect a growth rate of approximately 3.5% for 2019.
In what ways will Colombia’s accession to the OECD shape the economy going forward?
DUQUE: Colombia’s membership in the OECD is a crucial step in our efforts to modernise the economy, boost growth, gain the trust of investors and bolster our competitiveness in international markets. Its benefits can we summarised by improved public policy, more trust and investment in the local economy, and a greater international position and influence.
Citizens will see tangible improvements in their daily lives, as this is the true goal of implementing best practices that have worked for other OECD members. Since we have begun the process a number of public policies have been enacted to achieve unemployment rates similar to those in higher income countries. This stems from the international organisation’s focus on employability. In this context the government is not only working to lower poverty in monetary terms, but also across other dimensions such as access to transport infrastructure, education, quality health care and public utilities.
The administration has also enabled domestic companies to improve their valuations abroad, given the implementation of norms and best practices that bring them closer in line with international standards.
The advantages of OECD membership will continue to be witnessed, as the agenda includes matters related to continuous fiscal reform, general principals of data protection, labour regulation, protection of minority investors’ interests, corporate governance in public and private companies, environmental policy, the handling of industrial chemicals and e-commerce.
What policies could boost diversification and improve Colombia’s position in global markets?
DUQUE: Colombia’s trade policy is based on leveraging the potential of trade agreements to diversify our exports. With the aim of focusing on products that appear to have the most opportunity in international markets, we have designed a procedure which enables their identification and prioritisation based on the production capacity of the country’s regions, as well as the degree of international demand. This also entails identifying, analysing and addressing the barriers – especially non-tariff barriers – that have hindered the better performance of our exports.
Moreover, we will strengthen the instruments that have been efficient in promoting exports to date. This includes continuing investment in free trade zones, and promoting the use of the Special Systems for Importing and Exporting, known as the Plan Vallejo. Furthermore, international marketers are being employed to bolster the exports of MSMEs by helping them consolidate small productions that are directed towards specialised niches abroad and lowering export logistics costs.
In August 2018 the Thematic Committee on Trade Facilitation was created with participation from both private and public sector representatives, under which regional and sectorial workshops have been taking place. Here challenges faced by the private sector in their import/export procedures are identified and solutions are generated that involve all stakeholders.
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