Finance Minister of the Year for Latin America 2011
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Finance Minister of the Year for Latin America 2011

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Juan Carlos Echeverry, Colombia

Colombia’s finance minister is determined to create a new kind of public perception for the country based on strong economic growth and sturdy self-reliance

A decade ago, few positive words were used to describe Colombia. Politically, the Andean nation was trapped in a spiral of violence from left-wing guerrillas, right-wing paramilitary squads and drug traffickers. Economically, it was suffering from an acute economic downturn, unable to attract investment due to a tangle of restrictive taxes and protectionist policies.

Nowadays, the perception is very different, says finance minister Juan Carlos Echeverry. “Colombia has left behind that stereotype. The policies of presidents Álvaro Uribe and Juan Manuel Santos... have changed things,” he tells Emerging Markets.

Echeverry’s goal since his appointment following Santos’ inauguration in August 2010 is to create a new kind of stereotype, this time based on growth and confidence. “We are writing a new history of the Colombian economy, which is going to attract investment in the productive and financial sectors. There is tremendous interest to invest in Colombia, and investment is going to be between 25% and 30% of GDP this year,” he says.

Echeverry was instrumental in drafting legislation passed by Congress for fiscal responsibility, tax reform and a new royalties system. The fiscal responsibility law requires the state to lower its budget deficit progressively – the target is 2.3% of GDP in 2014, down from 4% today. It also has created a rainy-day fund using new mining and energy revenue.

He credits the changes with helping the economy grow by more than 5% so far this year, attracting investment and adding 700,000 new jobs. Cumulatively, these efforts were key to Colombia regaining its investment-grade sovereign rating in March after an 11-year hiatus and helped it to place $2 billion in international bonds in July. The placement was oversubscribed by more than $5 billion. “Colombia is a solid bet for investment,” says Alberto Bernal, head of research at US-based brokerage Bulltick Capital.

Ongoing and planned investment in mining and oil/gas is accelerating. The total area under oil/gas exploration has increased to 38 million hectares, from 8 million just a few years ago, while oil production, which had declined throughout most of the last decade, reached 953,000 barrels/day in August, already above the year-end target included in Echeverry’s 2010–14 economic forecast.

The government anticipates $1 billion in exploration revenues in the next three years on oil blocks auctioned last year, and expects the state to receive a huge windfall through a plan to place another 10% of shares in the state oil company, Ecopetrol, on the market. The government is also looking into the possibility of auctioning off mining blocks to boost exploration and investment in copper, gold and rare-earth minerals.

Echeverry says investment in mining and hydrocarbons will account for approximately 70% of the $12 billion in foreign investment expect by end-2011. The two sectors represented 86% of the $5.8 billion in foreign investment in the first five months of this year.

Also set to boom is the construction sector, as a result of the extractive boom and the government’s effort to move ahead with concessions for long-delayed infrastructure projects.

Echeverry says that the government will not let its guard down following an uptick in attacks on the oil and gas installations. Violence “is no longer a major concern for investors, but it continues to be a central issue for the government”, he says.

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