Hopes raised for Colombia investment boost

18/03/2012 | Lucien Chauvin

Finance minister Juan Carlos Echeverry has highlighted his country's $100 billion public investment plan as a key element of his strategy to hit 6% annual economic growth

Colombia’s $100 billion infrastructure investment plan will help the economy achieve its target of sustainable 6% annual growth, the country’s finance minister said in an interview yesterday.

Juan Carlos Echeverry told Emerging Markets the package would be a mix of public, private and public-private partnerships with a focus on transportation infrastructure.

The current administration is not the first Colombian government to boldly announce vast infrastructure investment, including ambitious investment funds, but they have never taken off.

Richard Frank, CEO of Darby Overseas Investment, said Colombia’s primary problem was inadequate infrastructure, which blocked its growth potential.

But Echeverry said: “The difference today is that we have money and there is interest in private companies that never existed before.”

Another difference today is the new climate of peace with the government having a much firmer grip over the Revolutionary Armed Forces of Colombia (FARC) guerrillas and drug trafficking.

The biggest change from this pacification will come in the countryside, where he predicts billions of dollars in the farming sector. “Colombia is the only large country in Latin America that has not had an agriculture miracle,” he said.

“The reason is obvious, because we had a war against the guerrillas and drug trafficking, and no one in their right mind was going to invest. With the peace and security, things have now changed.”

Apart from infrastructure Echeverry said that other four engines of growth were mining and energy, agriculture, housing and education technology.

The country has been experiencing a boom in coal mining and oil/gas for several years now, thanks to high international prices. Echeverry said if the other sectors took off as expected, the country would have “no problems growing at a sustainable rate of 6% for the foreseeable future.”

Colombia is positioning itself to be the new star in Latin America, betting on fast growth, low inflation and a level of competitiveness unparalleled in the Andean country’s history.

GDP is forecast to expand by 6%, foreign investment is at a record high, inflation is under control and exports are not only booming but have diversified rapidly in both items and destinations in the past three years.

A third of Colombian exports were destined for Venezuela in 2008, but that number dropped to 15.6% last year. It has been made up with increased flows to neighboring Ecuador and Peru and, more importantly, the rest of Latin America. Trade with countries outside the Andean region represented 26.4% last year, up from 17.1% three years earlier.

The government expects two new free-trade agreements, one approved late last year by the US and another by the EU on March 17, will not only help with trade, but will make the country more attractive to investment and enhance its competitiveness. Echeverry said: “Trade is important, but I am more interested in investment. New investors are going to look at Colombia as a potential platform to export to EU and United States,” he said.

http://www.emergingmarkets.org/Article/2997077/Hopes-raised-for-Colombia-investment-boost.html