Interview with Mauricio Cardenas

Director of Fedesarrollo
Date: 07th of May 2008

Could you tell us about Fedesarrollo?

Fedesarrollo was founded in 1970. It’s a non profit organization dedicated to economic and social research. It is an independent organization, basically with the aim of doing research that ultimately improves the public policies quality of Colombia. It was the first Colombian public Think Thank and it has been the centre of training and professional activities of Colombian technocrats. Colombia has a tradition of a strong technocracy. Most of the members of the economic cabinet of the Colombian government are Economists with strong academic training. Most of them at one point or another in their professional careers have been affiliated with this institution.

How do you finance your projects and can you give some examples of recent projects?

We work with equally with international organizations, the Colombian government, and the private sector. We have done hundreds of research projects throughout the years, but currently we are conducting a research agenda that puts a lot of emphasis on issues that influence the competitiveness of the Colombian economy, related to taxation and infrastructure. We are also working strongly on ways to reduce informality in our economy and lately we are engaged on a series of projects measuring the impact of various social expenditure programs.

Colombia has a great economic growth and changed a lot. How would you explain this?

Lately the economy of Colombia has been growing at high rates (in 2007 economic growth was 7.5 percent). This has been the result of improved security conditions, which resulted in consumer and investors confidence. Also, the economy has benefited from the increases in commodity prices, especially of mining and oil, which of course improved our balance of trade. And last but not least, Colombia is extending its external trade in a very aggressive way. Last year our exports to Venezuela doubled.

Do you think that the current president Uribe played an important role in the economic growth?

The president has done a remarkable good job, both in the security areas and terms of macroeconomic stabilisation. There has been continuity in the macroeconomic policies initiated by the Pastrana Administration. Having said this, I would disagree with the view that the success of Colombia is associated to a particular individual. Although it is true that the president played a very important role, I would say that Colombia is a country of good institutions, which is part of the success story.

Do you think that Colombia has good candidates for the next presidency?

I have no doubt. I think that for Colombia it is better that it continues with the tradition of renewal and that some fresh air will come into the government. If investors see a smooth and stable transition they will happier than without regime change.

Colombia has been an agricultural country for many decades. However, there have been some major changes. What do you think today are the most important sectors?

Well the truth is that Colombia’s growth, at least in the terms of exports and economic activities, in the future will rely on mining and energy. Colombia is investing heavily in oil, coal, and precious minerals. Those sectors are likely to be very important to the future. However, last year’s growth was associated with manufacturing, construction and retail. This reflects the fact that there is a lot of demand for durable goods and housing. And that is of course reflecting the improvement of income of the Colombians.

If we compare Colombia with other Latin American countries, is it an attractive country for foreign investors?

Colombia is a country that basically has reformed its policies and regulations about foreign investment significantly. It is an entirely open country and it has introduced significant changes to the tax code. I am convinced that rating agencies will give Colombian investment grade status within a year..

Colombia still has a bad image and people still think it is an insecure and dangerous country. What do you think should be done to improve this image?

I don’t think it is something you can achieve in a short period of time. I am not favour at all of promotion campaigns. What really changes the image of a country is success. You have to give it some time but I really think Colombia is going to be a successful country. We do have problems, but we also have a lot of strengths like the human capital, which at one point will dominate the picture.

What would be in your opinion Colombia’s biggest challenge in order to grow in the future?

I would say that Colombia’s economic growth depends on the capacity to develop external markets and diversify its trading partners. In addition, there is still progress to be made on the security front. The homicide rate is currently at 35 per 100.000, above the Latin American average. This will require additional expenditures (and taxes to fund them) in the security areas. The third challenge is to be able to continue resisting pressures to derail macroeconomic stabilisation. Not everyone in Colombia is convinced that low inflation and low deficits are key to economic success.

Do you think that the goal of the government to get 4 million tourists for 2010 is realistic?

I would say that the government has gone beyond what is reasonable, because it has given an unbelievable tax break to investments in tourism, essentially 30 year income tax exemption. We criticized that because we think it is an excessive incentive. Colombia has a clear strength in biodiversity and ecotourism. But the truth is that it is hard to attract tourists because security is still a concern. So I would be careful in not exaggerating on the potential of the tourism sector.

What would be your personal message to our readers?

It is already a cliché to say that Colombia is a well kept secret. It’s no longer a secret, it is already out there and people are talking about it. For many years Colombia was relatively neglected by foreign investors, because the security reasons were too dominant. There are still many areas where profitable opportunities can be found for investors. My advice is come to Colombia and, undoubtedly, you will be satisfied and surprised. It is amazing what the media can do against the image of a country. Here perception is not reality.