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AmericasMarch 3 2014

Colombia's president touts peace and prosperity

Juan Manuel Santos, Colombia’s centrist president, is the front-runner in presidential elections due to start in May and, if national polls prove correct, looks set to win a second term in office.
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Colombia's president touts peace and prosperity

Q: What are your main reasons for wanting to run for a second term?

A: Over the past three-and-a-half years we have achieved important economic, social and security improvements. We promoted reforms that had been on hold for a long time to improve equity and compensate millions of victims of the armed conflict [between the Colombian government and the Revolutionary Armed Forces of Colombia, or FARC].

We are now in dialogue with the FARC guerrillas that should lead to the end of that conflict. All these processes are progressing and demand continuity to be realised. That is why I decided to run for a second term because we are moving forward positively and we have to conclude the task.

Q: Are you optimistic that a final agreement with FARC can be reached and, if so, why?

A: Our purpose has been to conduct a process that is serious, dignified, realistic and effective, and up to now we have managed to do just that. For the first time in the history of talks attempted with the FARC, a realistic rather than a maximalist approach has been agreed, focused solely on conflict-related topics.

In-depth agreements have been reached, as is the case with the first two items of the agenda: comprehensive rural development and political participation. All this enables me to be moderately optimistic and foresee that, if we continue at this pace, we can reach final agreement before the end of 2014.

Q: If the peace process is successful, in what way will this be a game-changer for Colombia?

A: The armed conflict has been an obstacle to development for nearly half a century. If Colombia has managed to achieve high investment levels, good economic growth and greater social equity in spite of this conflict, just imagine what we can do if we remove that obstacle.

Economists estimate that if we reach an agreement to end the conflict, the country’s gross domestic product [GDP] growth will increase by an additional 1.5% to 2.5% on an ongoing basis. With peace there will be more investment, more tourism, [a bigger budget for social-sector priorities] and a more active government presence in the entire country.

Q: How do you characterise Colombia’s economy now?

A: Undoubtedly, the Colombian economy is going through a good phase, which makes it stand out as an attractive destination, not only at a regional level but worldwide. That is what international analysts say and what different indicators prove.

Over the past 40 months, unemployment has consistently decreased, to the extent that we are the country that has created more jobs in the region during the past three years. [Colombia also has] the lowest inflation in [South America] and an investment rate second only to Chile. Our exports, foreign direct investment [FDI] and tax revenues show unprecedented record figures. And the best thing is that we have achieved all this without increasing our indebtedness. On the contrary, we have reduced our fiscal deficit year after year.

We recently placed $2bn of 30-year sovereign bonds on international markets at a quite low interest rate and received offers for twice the amount, which demonstrates investor confidence in our economy. The forecasts of international bodies – for example, the International Monetary Fund – speak of 4.3% to 4.5% growth for our economy in 2014; above the regional average. With the huge investments we are making in infrastructure and the progress of the peace process, I am optimistic we can achieve 5% growth.

Q: FDI into Colombia is breaking all records. Which countries are investing most? Is there more diversification in the sectors receiving investment?

A: FDI flows into Colombia have increased significantly. Since 2002, FDI flows into the country rose more than 700%, reaching their highest value in 2012 at $15.6bn. Official data for 2013 is not available yet but we expect FDI to reach more than $16bn.

A large share of FDI has traditionally come from the US, UK and Spain. However, Latin American countries have been increasingly investing in the country in the past few years. In fact, in 2012, Chile was the largest investor in Colombia with a share of nearly 20% of FDI inflows.

In regards to FDI by sector, while the hydrocarbon and mining sectors still receive a large percentage, their share of total FDI has been declining, allowing sectors such as manufacturing, transport… and communications to receive more.

For FDI, Colombia offers a very attractive business environment. The GDP per capita has almost doubled over the past decade, rising from $5826 in 2000 to $10,350 in 2012. We provide stability and clear rules of the game, and only ask investors to be socially and environmentally responsible.  

Q: What are the benefits of the Pacific Alliance so far? Have there been other significant initiatives during your government making Colombia’s economy more open and international?

A: First, I would like to provide a more detailed explanation of what the Pacific Alliance actually is. It is a political, economic and co-operative integration mechanism between Chile, Colombia, Mexico and Peru. Its main goal is to create a deeply integrated area to foster growth, development and competitiveness for member countries by increasing the free movement of goods, services, capital and people.

So far we have had significant achievements, such as the trade agreement. [This was signed during a presidential summit of the alliance in Cartagena, Colombia, on February 9 and 10.] We have also made significant achievements in areas such as visa elimination, capital market integration, shared embassies… and health co-operation.

In 2013 we will probably achieve the second largest amount of exports in Colombia’s history [estimated at $58bn]. In 2013 we had great developments in terms of trade negotiations. We signed free-trade agreements [FTAs] with South Korea, Costa Rica and Israel, and we concluded negotiations for a FTA with Panama.

Moreover, Colombia’s FTAs with the US and the EU came into force in 2012 and 2013. Now we can export our products without barriers to almost 1.5 billion people around the world. We are turning Colombia’s economy into an international economy.

Q: Your government has made the reduction of inequality in Colombia a priority. Why?

A: I am deeply convinced that real progress cannot be achieved without social equity. For a long time, Colombia’s economy has been growing but the same was true for inequality indices, which show that growth was not benefiting the most vulnerable in the population.

Over the past three years we have managed to reverse that perverse trend and today Colombia has achieved the highest reduction of inequality in the region after Ecuador. [A total of] 2.5 million people have come out of poverty and 1.3 million have overcome extreme poverty.

How have we managed to achieve this? With targeted social programmes that start with early childhood care, including free access to basic and secondary education in public schools; incentives for youth training and employment; and monetary support and accompaniment for the poorest families and low-income elderly.

We reformed the mining royalties regime to improve their regional distribution. We changed the tax regime for the highest earners to pay more taxes and the lower earners to pay less or nothing at all. And we have achieved major progress towards universal access to the healthcare system. We don’t intend to be a model, but without a doubt there is much to share and learn from our experience. 

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