The Colombian government insists the economy will grow this year, and disputes forecasts by private-sector analysts who say the country is entering recession.
Finance minister Oscar Zuluaga told Emerging Markets that growth will be low in 2009, no higher than 1.5%, but would not enter negative terrain.
Morgan Stanley and Barclays have both revised downward their forecasts for Colombia’s economy: they respectively see it shrinking by 1.6% and 1.1%.
Their projections for Colombia are, nevertheless, better than the regional average, with Argentina, Brazil and Mexico forecast to shrink by more than 4%.
But Zuluaga said: “There are good perspectives that we will have positive growth, but it will be low. There are no elements leading us to believe that growth will be negative in 2009.”
The country’s solid financial system, low debt exposure, and currency and interest policies will contribute to Colombia’s economic performance, Zuluaga said. He added that the Central Bank has been reducing interest rates on nearly a monthly basis, and the government believes that bank has room for further cuts.
The government has also secured $2.4 billion in lending, including $1.3 billion from the IDB. The CAF and World Bank have also approved loans. Zuluaga said there might also be the possibility of issuing new paper during the year.
“We are analyzing conditions for pre-financing for 2010. One of the alternatives is the market for sovereign debt,” he said. Colombia’s foreign debt was 21% of GDP last year, down from 35% at the end of the 1990s when the last economic crisis hit the country.
Pedro Pablo Kuczynski, Peru’s former finance minister and a senior advisor to the Rohatyn Group, agreed that Colombia is one of several Latin American countries that, while impacted by the crisis, has solid fundamentals.
“Latin America is facing this crisis better than in the past. Peru, Colombia and other countries have been undergoing reforms since the last crisis in the 1990s that have strengthened them,” he said.
While Colombia’s government is not making any predictions for 2010, a report issued by Barclays last month forecasts a small rebound next year, with GDP growing by 3.8%.
Much of the government’s forecasted investment reside in an ambitious infrastructure plan that includes more than 130 major projects – including roads, port and energy infrastructure – with a price tag of around $40 billion.
The state oil company, Ecopetrol, is also going through a massive expansion that Zuluaga said will impact positively the economy. It has committed more than $1 billion investment since February. Locally, it has made a $750 million deal to acquire Hocol, a small upstream oil producer, from Maurel & Prom of France.
In Peru, Ecopetrol has together with South Korea National Oil Company bought Petro-Tech for $900 million, and taken stakes in exploratory lots operated by Petrobras of Brazil.
“Ecopetrol is an important factor, because it has a very aggressive investment plan,” Zuluaga said.
He added that all the efforts undertaken this year aim to lower unemployment, which now tops 14%“Unemployment is our greatest concern. All of our actions are to protect jobs,” he said.