OBG talks to President Juan Manuel Santos Calderón

Interview: President Juan Manuel Santos Calderón

How will you compensate for revenue shortfalls caused by volatility in commodity prices?

JUAN MANUEL SANTOS CALDERON: We have approved a number of reforms, including a new fiscal rule, a reform for fiscal sustainability and a new royalties law. These are important tools to ensure macroeconomic stability both in boom times and in times of scarcity. Thanks to these reforms, Colombia’s institutional framework for managing public resources is transparent and flexible. Based on a conjectural temporary reduction of income associated with commodity prices, the fiscal rule gives the government the capacity to maintain investment levels by issuing more debt. If the drop in revenues is structural and long-term, the government has the ability to adjust its level of expenditure to preserve fiscal sustainability.

In what ways could international support in a post-conflict scenario prove most beneficial?

SANTOS: The most important thing in a post-conflict scenario is control of the peace process at a national level, so as to achieve reconciliation and incorporate those who renounce weapons into social, economic and political life. In this sense, the ideal mechanism would be one controlled by the government and driven by the national interest in overcoming the challenges arising from the demobilisation of guerrilla forces.

Once the process of achieving national reconciliation and peaceful coexistence has been solidified, the state can receive support from international organisations. Such assistance would hopefully focus on the areas of agriculture, industrial development and training of young people, among others. This sort of international help would be the best support that any country undergoing a reconciliation process can have.

What do you think will be the economic impact of a successful peace process with the Revolutionary Armed Forces of Colombia?

SANTOS: Achieving a peace agreement is important for the country, as this would lead to greater social and economic stability in the medium term. Colombia has seen significant economic achievements in recent years, such as reducing inflation, strengthening the finances of public institutions, and the consistent reduction of unemployment, poverty and inequality. These results would doubtless be multiplied in a country at peace.

A peace deal will also boost the development of agriculture, which is the most delayed sector in terms of productivity, as the security conditions in remote regions are not conducive to large-scale investments. Ending the conflict would add an estimated 1.5-2.5 percentage points to GDP growth, with significant gains in productivity and welfare. Foreign investment, which is already growing and reaching record levels, will undoubtedly be more comfortable in this new scenario.

What will be the practical benefits of Colombia’s accession to the OECD?

SANTOS: Joining the OECD would mean we could increasingly improve the quality of public policies and be able to measure ourselves by the highest standards. It would also further increase investor confidence in the country and ensure that Colombia is at the centre of major global economic and political activity.

The OECD will not tell us what to do but rather how best to carry out our initiatives. In fact, there is already a path to follow, which has been established hand in hand with the OECD. Part of the reason for Colombia’s achievements in recent years comes from what we learned from this organisation. For example, the OECD’s recommendations were taken into account when formulating our development plan, as well as in the design of the 2012 tax reform, which sought greater equity in taxation and is generating hundreds of thousands of jobs. Also following OECD advice, we reduced tariffs on commodities and capital goods and developed a complaints mechanism for procurement processes that are suspected of corruption. This mechanism is already being implemented in vital infrastructure megaprojects and works as a pilot programme worldwide.