BOGOTA, Colombia — The economics professor who has been tapped as Colombia’s up coming finance minister states the left-leaning government taking office next thirty day period will concentrate on increasing taxes on the rich so it can commit extra on poverty systems.
But Jose Antonio Ocampo said the administration will respect the autonomy of the central lender and function with scores organizations on recovering the nation’s money standing. He added that international investment decision will proceed to be welcome in Colombia.
“We want a Western European form of capitalism,” he stated. “Not a capitalist procedure in which the distribution of wealth is among the most uneven in the environment.”
Ocampo, a Columbia University economist who has led the United Nations Financial Commission for Latin America, was a short while ago asked 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 Press on Tuesday, Ocampo promised that the Petro administration will be fiscally liable and keep away from radical variations in financial policy even as it seeks to increase tax revenues.
The new administration will not have a greater part on its very own in congress, so Petro has been doing the job to some degree properly to earn about other functions to assistance his systems, though he probable will have to compromise.
Ocampo claimed Petro’s leftist coalition would like to strengthen tax collection by close to $11 billion every single 12 months as a result of a program that would broaden the nation’s tax revenue by all over 25%. He reported the additional cash would go to build streets in rural regions and to implement training and overall health treatment programs to minimize social and financial inequalities.
That could be a tough provide. An hard work final year by the recent governing administration to elevate $8 billion in taxes, primarily from the middle class, sparked virtually two months of at times violent protests and forced the finance minister to stage down. Finally, President Ivan Duque passed a a lot more modest $4 billion tax plan that avoided boosting personal revenue taxes.
Petro is hoping to skirt political turmoil by focusing on the incomes of businesses and the nation’s wealthiest folks.
Ocampo reported cash flow taxes would be raised only for the best 1% of wage earners, which in underdeveloped Colombia usually means any person making $2,500 a thirty day period or more. Petro also seeks to revoke tax exemptions given to some companies less than Duque and says that a tax on wealth could be reinstated and that some pensions should be issue to taxes.
Ocampo reported he will meet up with with rankings organizations to talk about what Colombia can do to improve its status. Previous year, Benchmarks & Poor’s and Fitch downgraded Colombia’s bonds to junk status, although Moody’s maintained the nations’ credit score rating above that. That will make it extra pricey to borrow, with yields on Colombian federal government 10-calendar year bonds jumping to 12% from 7% in excess of the earlier calendar year.
The Colombian peso is also weakening, shedding 15% of its price to the greenback considering that Petro’s election victory on June 19. Ocampo explained the devaluation has been brought about by fears of a world economic downturn and desire charge hikes in the United States, which have also strike the currencies of other international locations in Latin The usa.
The economist included that whilst the administration will search for to strengthen taxes, it is not setting up to bolster its revenues by boosting oil exploration. He reported fracking will be banned owing to its probably unfavorable effects on the surroundings.
The Colombian state oil organization, Ecopetrol, is at present applying two fracking tasks that are in their initial levels. Earlier this 12 months, the corporation claimed fracking tasks could add 400,000 barrels of oil for every working day to Colombia’s output and secure natural gasoline reserves for the future 25 a long time.
Oil is currently Colombia’s main export. But during the presidential marketing campaign, Petro promised to section out dependency on oil and flip to cleaner kinds of power. He reported that as president he would not approve new exploration contracts.
“We will cease dependent on oil,” Ocampo explained. “But it will also be a gradual method.”