Colombia’s leftist authorities has signalled it may row again on its pledge to halt new oil and fuel exploration initiatives, saying it will first look at current contracts as a part of an overhaul of its fossil gasoline business.
Gustavo Petro, a former guerrilla fighter who took workplace as president in August, made the promise throughout his election marketing campaign. However finance minister José Antonio Ocampo mentioned in an interview that the federal government would analyse the 180 contracts earlier than deciding whether or not to fulfil the pledge.
“Then we are going to see if new contracts are vital,” he mentioned. Any vitality transition that lowered exports “must be gradual” and prioritise fuel self-sufficiency, Ocampo added.
Oil and coal collectively make up practically half the nation’s export revenues.
Since Petro got here to energy, his authorities has confronted financial headwinds, with the peso shedding 20 per cent of its worth in opposition to the greenback, outpacing most rising market currencies.
Public funds in Colombia, Latin America’s fourth-largest financial system, have remained largely secure regardless of many years of guerrilla insurgencies, however the central financial institution now expects gross home product progress to gradual to 0.5 per cent in 2023 from a predicted 7.9 per cent this 12 months. International traders offered near $1bn in authorities debt final month.
However Ocampo — a profession economist who has taken a sabbatical from instructing at New York’s Columbia College to serve in Petro’s authorities — mentioned the prognosis was not as unhealthy because it appeared. He blamed the autumn in overseas funding on opposition figures within the enterprise neighborhood: “They generate panic and are then victims of that very panic.”
The minister mentioned the federal government was aiming to cut back the nation’s fiscal deficit from 7.1 per cent this 12 months to 4.3 per cent in 2023, partly funded by a discount in gasoline subsidies. Such strikes may assist Colombia win again its investment-grade standing after it was downgraded to BB+ by S&P International and Fitch final 12 months.
Ocampo additionally sought to allay fears over a looming stability of funds disaster. Colombia has a present account deficit of 5.7 per cent of GDP, and with a strong dollar and uncertainty in Colombia’s vitality sector, analysts have warned of the impression on debt repayments and overseas forex earnings.
“This nation has a protracted custom of servicing its money owed and that can proceed,” Ocampo mentioned. “Subsequent 12 months we’re speaking about bringing the present account deficit to 4 per cent [of GDP] or much less.”
Munir Jalil, chief economist for the Andean area at BTG Pactual, mentioned: “The nation wants to indicate fiscal duty with a view to persuade market individuals and offshore traders to purchase Colombian property.”
Petro has urged rich nations to desert fossil fuels. “Governments should put politics in cost to create a worldwide plan to disconnect hydrocarbons instantly,” he mentioned final week on the COP27 climate summit in Egypt.
Petro’s signature tax reform bill, which is predicted to turn out to be legislation this month, goals to boost about $4bn subsequent 12 months, principally with duties on the oil and coal industries. The reforms embrace cancellation of a statute that allowed oil and coal corporations to deduct royalty funds from their tax payments, and a windfall tax on earnings.
Trade leaders say the measures risk deterring investors and leaving manufacturing hamstrung, whereas analysts argue the administration’s blended messaging on fossil fuels has exacerbated the peso’s fall.
Ocampo has sought to mood the federal government’s stance. When Petro floated a tax on capital flight, Ocampo rebuffed it on social media. Colombia’s newspapers have referred to him as “the grownup within the room”.
“Ocampo is a protected pair of palms and probably the most highly effective finance ministers in years,” mentioned Jorge Restrepo, professor of economics at Javeriana College in Bogotá. “However he can’t [maintain] the assist of the whole cupboard when it’s partly made up with those that come from activism.”
Requested how lengthy he deliberate to stay within the submit, Ocampo mentioned: “I’ve a one-year licence of public service from Columbia, which could be prolonged for one more 12 months. I’m not discarding the potential for staying on, however this job is exhausting and I’m not a younger man.”
