With Colombia's GDP expected to rise by 5% for both 2011 and this year, and a growing sense of optimism across the country, president Juan Manuel Santos explains why he is buoyant over the future of a country once dogged by corruption and drug trafficking.
"Governability," says Colombian president Juan Manuel Santos, "is an asset extremely important in the world today – look at Greece, or even the US." During an official speech in London in November 2011, Mr Santos detailed the many reasons he is hopeful about his country’s future. Having a stable government that is able to carry out the necessary reforms to promote economic growth is one reason. The sense of optimism that is growing within Colombia is another. “Colombians now think that their children will have better lives than they had,” he says.
The country's economy has been growing at high rates, with gross domestic product (GDP) expected to rise by 5% for both 2011 and 2012. And government unity has been crucial in implementing reforms needed to keep the economy on the growth path and to pursue social policies, too, believes Mr Santos. “In the past 15 months, the amount of constitutional reforms, regulation and major reforms that became a reality… has allowed us to have a very coherent economic policy complemented by a very ambitious social policy,” he says.
Future planning
Since taking office in the summer of 2010, Mr Santos’s administration embarked on a series of reforms, from fighting tax evasion and corruption to putting more funds behind the police and armed forces in the fight against the FARCs, the revolutionary armed forces of Colombia, which Mr Santos now says are politically defeated and weakened militarily. Efforts to crush drug trafficking, which had been intensified during the previous administrations led by former president Álvaro Uribe, when Mr Santos served as minister of defence, resulted in the activity now accounting for only 1% of the country's GDP, down from 8% in the 1980s.
Fiscal stability is high on Mr Santos’s list of priorities, and rightly so. A fiscal responsibility law was passed mid-2011, which contributed to all three major international rating agencies assigning investment grade status to the country. Helped by high economic growth, Colombia did enjoy higher tax receipts and an improved fiscal deficit – which was estimated to be about 3.3% of GDP for 2011. However, global economic uncertainty poses a threat to the country’s economy for 2012 and may reduce its ability to finance public spending.
Colombia successfully raised funds on the bond markets in 2011 and, towards the end of the year, it announced that it would ease its fiscal burden, and rather than pre-finance its needs for 2012 it would execute a large debt swap to reduce its obligations for the year.
Infrastructure spike
Much more still has to be done, of course. Like most fast-growing economies, infrastructure is a potential bottleneck for Colombia and even for a government with rising fiscal revenues, the cost of developing transport and energy networks would be too much to bear. The government estimates that about $30bn will be spent on infrastructure over the next four years. “Part of it will come from our own funds, part will be [alongside] partners,” says Mr Santos. To facilitate private sector involvement in such deals, a new law regarding public-private partnerships (PPPs) was being discussed in December 2011.
Insisting on prudent budget management and a stricter fiscal rule means that a big chunk of the needed infrastructure financing must indeed come from sources other than the government. “I could spend a lot right now but then I’ll pay afterwards, and I don’t want to do that. I would pay in macroeconomic terms, because I would pay with higher inflation and so on,” says Mr Santos. "We need to maintain fiscal balance, so PPPs are a priority. I tell investors, 'if you come and propose a concession for ports, roads, airports, trains, that would be music to my ears, because I have no fiscal limitations'."
