Venezuela instability a risk for Colombia growth – finmin

LONDON (Reuters) – Colombia’s economy faces its greatest risks this year from instability in neighbouring Venezuela and the slump in commodity prices, the country’s finance minister said yesterday.

Growth forecasts for the Andean country are likely to be downgraded, with 4.4-4.5 per cent a likely rate for 2013, Mauricio Cardenas told Reuters editors and Reuters Television.

Future growth however could see an annual boost of two percentage points, thanks to planned increases to infrastructure spending and if peace talks with Marxist-led FARC rebels – due to restart on Tuesday – succeed in ending half a century of insurgency.

“We are going to make an announcement by the end of this week of between 4.4 and 4.5 per cent, we are revising our projections a little downward,” he said of the growth forecast which is currently at 4.8 per cent.

The exact revision is dependent on economic data coming through this week.

Falling commodity prices are an issue for Colombia, whose main exports include oil, coal and coffee. The other worry is Venezuela, which is facing shortages of basic goods from toilet paper to wheat flour, raising fears of instability.

“Developments in Venezuela are very important to us – a stable growing economy in Venezuela is very important from Colombia’s perspective,” Cardenas said.

He added Colombia has been talking with Venezuelan ministers about the possibility of offering food for oil, or food for future oil reserves.

“We are very dependent on commodity prices, and whatever happens to future oil prices,” Cardenas said.

The government was likely to keep a Brent crude oil reference rate of around $100 a barrel for budget purposes, he said, not far below
the current $104 level.
The US shale gas revolution has also cut the United States as an export destination for Colombia’s coal, he added.

Colombia has a potential growth rate of between 4.5 and 4.8 per cent, but ambitious infrastructure spending plans could add around a percentage point to those estimates, Cardenas said.
The government plans to spend $20 billion on infrastructure over the next 10 years, with most focus on roads, and is looking for around $30 billion from the private sector, he said.
“Better infrastructure will add one percentage point to growth, and the peace process another percentage point,” Cardenas said, adding that the impact of the peace programme could be felt quickly.

President Juan Manuel Santos has said he wants the talks with FARC ended this year. The two sides last month reached agreement on the critical issue of agrarian reform.
More than 100,000 people have died in the war which has diverted billions of dollars from the economy.
Cardenas said that if peace with FARC were agreed: “There will be more investment, there will be more projects; the sectors that will benefit the most are agriculture and energy.”

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