By Salomón Kalmanovitz, EL ESPECTADOR, August 13, 2023
https://www.elespectador.com/opinion/columnistas/salomon-kalmanovitz/la-macroeconomia-de-petro/
(Translated by Eunice Gibson, CSN Volunteer Translator)
After one year of his administration, the macroeconomic analyses for Colombia are looking pretty good. The external trade deficit and the capital flow are reduced from a dangerous 6.2% of GDP, the legacy of Iván Duque, to 4.1% at the close of the first quarter (some experts say it’s 4.4%), as it was going in that direction at the time of the close. The exits of capital have shown behavior similar to those of the past, but are 11% less for 2023 as compared with 2022, furnishing more ease in the balance of payments.
The trade balance has also been reduced from USD $19,200,000 to USD $4,700,000 in the first quarter of this year, where luck played a part, as not only did the price of oil rise, but also the country’s income in foreign currency, and imports were reduced because of slower growth in the economy. The economy grew only 2% or less, also reflecting deterioration of economies throughout the world.
Throughout these rubrics, the flows of capital reflect that investors have confidence that the new administration will not change the rules under which they enter and operate in the country, and that they will be able to make a profit and take it out if they consider that appropriate or re-invest it if they see new business opportunities.
The fiscal deficit has been corrected to some extent, from 5.3% of GDP in the first quarter of 2022 to 4.3% projected (with luck) in 2023, in which they will have to see delays by the new administration in the appointment of its administrators and of those who will carry out the investments in the different sectors of the economy. The collective firing of highly experienced Ministers shortly after the beginning of the quarter in order to appoint new but loyal followers of the President did not help. This administration’s mortal sin is its failure to get things done.
The new Treasury Minister, Ricardo Bonilla, has been very passive on the subject of spending, which means a waste of funds that are no longer being used; they’re losing opportunities to invest in physical infrastructure (highways, bridges, schools, hospitals, etc.) and social services (education and health). A bolder policy would be better to benefit a population that has so many needs.
Colombia’s macroeconomic results have been certified this way by the risk analysts: Fitch Ratings gives its long term debt a grade of BB+ with a stable perspective, and gives the same grade to the behavior of Colombia’s peso; Standard and Poor’s gave a grade of BB+/B and maintains its stable perspective, similar to the grade from Moody’s. What these entities do is evaluate the credibility of the policies and the institutional and macroeconomic strength, which result in a grade close to a 4, if we go back to the grades they used to give us in school. However, the country’s debt is very high, external debt at 53.3% of GDP, and that could create problems in the future. The risk premium remains high at 763 points, compared to 670 points for Mexico.
The peso has experienced an increase on the order of 20% in the last year. That means that we are gaining in our capacity to purchase property in other countries, but at the same time, exports are losing increases in Colombian currency, while local producers are competing against imports. Paradoxically, President Petro was trying to do the contrary, devaluing our currency and thus exporting more and importing less, supposedly in order to re-industrialize the country.