WINDOW ON THE FUTURE

Colombia 2019 | ECONOMY | INTERVIEW

Economic indicators point to calm seas ahead for Colombia's financial sector, according to the governor of Banco de la República.

Juan José Echavarría
BIOGRAPHY
Juan José Echavarría holds a degree in engineering from Universidad Nacional de Colombia, a master’s in economics from Boston University, and a PhD in economics from Oxford. His career has seen him serve in leadership positions in both public and private sectors, including as Director of Fedesarrollo, Plenipotentiary Minister of the Mission of Colombia to the OAS, Vice Minister of Foreign Trade, and Director of Economic Research of the National Federation of Coffee Growers. In the academic sector, Echavarría has served as Professor at the Universidad del Rosario and Dean of the Faculty of Economic Sciences at the Universidad Nacional.

What growth do you expect for the Colombian economy for the next two years?
For 2019, we expect growth of 3.5%, which is much better than 1.4% in 2017 and 2.7% in 2018. Our average growth over the last 15 or even 30 years has been between 3.3 and 3.5%. That is not bad in these times and is good in the region, too. Countries like Bolivia and Uruguay are growing faster, but it is a good rate. And part of the story is that there are huge shocks like oil prices, financial crises, and others. However, right now, we have a new president and less uncertainty, and the tax reforms that were discussed last year have been already decided.

What sectors will drive the growth in Colombia?
Most sectors are doing well. Manufacturing and finance are growing fast. The statistical department has a new method to put the sectors together, so it is difficult to compare things to the past. In general, most sectors are growing faster than in the past. Public administration, commerce, and the financial sector are doing well. Although construction did well in the last two quarters of 2018, that is the sector that we worry about.

What sectors are the most attractive for international investments?
Half of FDI goes to mining, though transport and manufacturing also receive considerable FDI. Oil and mining depend a lot on oil prices, so it varies. Our technical staff is expecting USD63 per barrel in 2019; however, this is difficult to measure.

What sectors should Colombia look at to diversify its exports?
Agricultural exports should be key. They are doing well in Chile and Brazil but not in Colombia. One of the problems is protection in Colombia; we have a protective private sector. We have some products that have 80% tariffs, and if we do not remove these tariffs we will not start to export because it becomes more attractive to sell in the domestic market than exporting. Unfortunately, I do not see this debate taking place. So far, I do not see a discussion on what we have to do.

How can Colombia address its lagging productivity?
To grow more, we have to increase fiscal figures and pension reforms to ensure people save for old age. The best factor to increase productivity would be to open the economy. But we are not doing it.

What factors could impact the economy long term?
We have some balances that we would have to correct. We have fiscal rule in Colombia that reduces the deficit in the long run to 1%, so I expect a structural deficit in the long term. For the next few years, we have to work to reduce subsidies and introduce technologies in the tax system through online invoices. The external deficit of Colombia is close to 3.8%, which is higher than what we expected.

What are your predictions for the economy in 2019?
In general, what I see is positive compared to international volatility and Latin America. Inflation is doing well; the economy is growing, and the exchange rate has been stable. Therefore, we will have a good 2019.