Colombia’s incoming finance minister wants fair capitalism

BOGOTA, Colombia (AP) — The economics professor who has been tapped as Colombia’s upcoming finance minister claims the still left-leaning federal government getting workplace future thirty day period will focus on increasing taxes on the prosperous so it can commit more on poverty plans.

But Jose Antonio Ocampo mentioned the administration will regard the autonomy of the central bank and function with ratings organizations on recovering the nation’s fiscal standing. He included that overseas expense will carry on to be welcome in Colombia.

“We want a Western European kind of capitalism,” he mentioned. “Not a capitalist procedure in which the distribution of wealth is among the the most uneven in the globe.”

Ocampo, a Columbia University economist who has led the United Nations Economic Fee for Latin The us, was not long ago questioned by leftist President-elect Gustavo Petro to serve as his finance minister when the former guerrilla fighter is inaugurated Aug. 7.

In an interview with The Affiliated Push on Tuesday, Ocampo promised that the Petro administration will be fiscally responsible and continue to be away from radical modifications in financial policy even as it seeks to increase tax revenues.

The new administration will not have a vast majority on its very own in congress, so Petro has been working somewhat correctly to win more than other events to aid his courses, though he possible will have to compromise.

Ocampo explained Petro’s leftist coalition wants to strengthen tax assortment by about $11 billion each individual yr through a system that would extend the nation’s tax profits by all over 25%. He claimed the included money would go to build streets in rural parts and to put into action training and wellness care plans to reduce social and financial inequalities.

That could be a difficult provide. An exertion very last yr by the current governing administration to increase $8 billion in taxes, generally from the middle class, sparked just about two months of occasionally violent protests and forced the finance minister to move down. Finally, President Ivan Duque handed a far more modest $4 billion tax strategy that avoided increasing unique revenue taxes.

Petro is hoping to skirt political turmoil by concentrating on the incomes of companies and the nation’s wealthiest men and women.

Ocampo claimed income taxes would be raised only for the top 1% of wage earners, which in underdeveloped Colombia indicates any person generating $2,500 a month or additional. Petro also seeks to revoke tax exemptions given to some companies below Duque and says that a tax on wealth could be reinstated and that some pensions need to be issue to taxes.

Ocampo stated he will meet with ratings organizations to go over what Colombia can do to strengthen its status. Very last yr, Criteria & Poor’s and Fitch downgraded Colombia’s bonds to junk status, though Moody’s taken care of the nations’ credit score ranking earlier mentioned that. That will make it much more highly-priced to borrow, with yields on Colombian federal government 10-year bonds jumping to 12% from 7% in excess of the previous 12 months.

The Colombian peso is also weakening, getting rid of 15% of its price to the greenback due to the fact Petro’s election victory on June 19. Ocampo reported the devaluation has been induced by fears of a global recession and interest charge hikes in the United States, which have also hit the currencies of other international locations in Latin The us.

The economist added that whilst the administration will seek to boost taxes, it is not scheduling to bolster its revenues by boosting oil exploration. He said fracking will be banned because of to its perhaps damaging consequences on the environment.

The Colombian state oil business, Ecopetrol, is currently employing two fracking assignments that are in their first stages. Before this yr, the enterprise explained fracking projects could add 400,000 barrels of oil per day to Colombia’s output and protected normal fuel reserves for the next 25 yrs.

Oil is now Colombia’s main export. But in the course of the presidential campaign, Petro promised to period out dependency on oil and switch to cleaner kinds of energy. He explained that as president he would not approve new exploration contracts.

“We will stop based on oil,” Ocampo reported. “But it will also be a gradual process.”