What Jumps Out – Gustavo Petro’s New Finance Minister

Over the coming hours José Antonio Ocampo should be named as the finance minister for Gustavo Petro and it should be an appointment that offers a little of something to everyone. Campo is one of the country’s finest economists who already has decades of experience, including as Finance Minister in the 1990’s, and who has served in high office with the United Nations.

However, as well as being an economist who has authored, co-authored, or edited hundreds of books and education papers, including with Joseph Stiglitz, he is considered to be something of a humanitarian who looks at issues from a different angle. Ocampo has been charged in the first instance with the completion of both a complex tax reform and a development plan by the end of the year.

He is a critic of Colombia’s continued inequality, especially in the rural regions, access to pensions and as well as gender gap in terms of opportunities. Speaking to El Espectador recently he stated: “The biggest challenge for the new government is overcoming social inequalities.”

That same publication offers further clues as to the type of finance minister we are about to see take his seat.

Speaking to the economy going forward, Ocampo sees an unemployment number that is still one of the highest in Latin America, and of the international issues that are impacting Colombia: the risk of a slowdown, if not a recession is there.

“The biggest challenge for the new government is overcoming social inequalities.” – José Antonio Ocampo

Ocampo also mentions the low productivity level in Colombia where one of the causes is lack of R&D – Colombia ranks 10th in Latin America in terms of % of GDP, and there is a need for active development policies.

Ocampo has been serving as professor of professional practice at the School of International & Public Affairs at Columbia University in New York.

One of the key areas of potential development is agriculture, especially in the more remote areas, which is covered by the peace agreement. That agreement committed to the redistribution of 3 million hectares (11,583 square miles). Ocampo appears keen to push these areas forward via existing access to funds as well as tertiary roads and access to water. All while executing this process, the environment must be protected.

Ocampo is keen to see the fiscal deficit reduced however with the need for continued social spending the emphasis for the readjustment will be on a structural tax reform. This will be a balancing act, on the positive side oil prices are favorable but also the cost of financing overseas debt is high. In terms of taxes, collections are low versus the average in Latin America and well below other OECD countries.  Income tax and capital gains taxes are where the key issues lie, especially amongst the richest 1% of the country.

In the area of corporate taxes Ocampo sees the need to rationalize free trade zones and sectorial benefits – preferring to concentrate on export-led activities.

Clearly Ocampo has an enormous amount on his plate, and he appears set to bring his past experience as the UN’s Undersecretary of Economics and Social Affairs to bear. Of all the areas the tax and land reforms will be the ones that garner most attention. Judging by history the question will be:

 “What do those reforms look like when they leave Congress as opposed to when they enter?”

Petro has been extremely successful over his first 10 days in reaching across the aisle to other parties to find common ground for the next four years. The question is that when it comes to moving reforms through congress, what will they ask in return?

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That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops

José Antonio Ocampo photo: https://ocampojoseantonio.com/home/