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Luis Alberto Rodríguez is the director of National Planning. He is a prominent young economist, who now has the responsibility of planning Colombia’s public and economic policies. Explain their failures and challenges.
(We recommend: The major works stopped by quarantine that are reactivated this April 27)
Colombia has less handling of funds maneuver than other countries in the region, which have saved more in the past. For example, Chile and Peru are now spending several points of GDP. Does that put us at a disadvantage?
In 2018 Peru had a debt close to 20% of GDP, while ours was above 45%. Colombia was able to make greater efforts when oil prices were higher in the past decade.
Despite the limited fiscal space, we need solutions, the problems do not wait. Starting the emergency, with decree 444, we created a source of resources close to 15 billion pesos, apart from the General Budget of the Nation 2020, which is the famous Fome (Emergency Mitigation Fund).
We have been adding more resources to that fund. We know that more resources may be needed in the framework of care for covid-19.
Let’s talk about the royalties, which are from the governors and mayors. Planning is what controls them. Did they spend them, are they spending them, or are they going to spend them? And if they haven’t been spent, why?
In 2018, just approving a project in the General System of Royalties took about 160 days, with a very large bureaucratic burden. In 2019 it takes us, in the same General System of Royalties, 65 days. But it’s not enough. That is why we passed a legislative act, 005 of 2019, which has two objectives: first, to further reduce the bureaucracy of the General Royalty System and, second, to return resources to the producing regions, without taking away the non-producing ones.
All decisions made in economic policy will have to be evaluated with all possible self-criticism
Is that royalty system working efficiently?
Definitely yes, but still supports tweaks. Due to the emergency, we issued a legislative decree that allows mayors and governors to execute the resources of royalties, if they are for health, more expeditiously. Those resources are from the regions, and we do technical assistance and accompaniment work.
But, apparently, they are being stolen …
It seems unfair to me to generalize. I believe that the control agencies are doing a great job to take care of public resources in the pandemic. I also believe that there are territorial investments that are worth applauding.
Is the government not thinking of getting hold of these resources for the coronavirus?
The Constitution does not allow it. On the contrary, our reform in 2019 what it achieved was precisely to remove that centralism from the General Royalty System approved in 2011, which although it had some positive things, for example, that it sought to reduce the famous ‘wave pools’, also took away resources to the producing regions. Our reform returns resources to the regions and reduces bureaucracy.
The Banco de la República is guaranteeing liquidity. Issues and contracts to maintain an interest rate that your own board has set at 3.75%. Do you think you are doing well?
Definitely. Much of the performance of the Colombian economy is due to a very solid economic institutionality. With an independent central bank, on whose board the Ministry of Finance participates, which until now has been providing liquidity, not only in the way you mention it. The bank has been timely, and is one of the great legacies we have in economic policy.
What the bank has done these days is buy papers; from banks, CDT; and the Government, TES. But the question is: should the bank go further, lending the government silver with the little machine?
I would be wrong to intervene in conversations of the board of directors, it must be she who makes those decisions. However, I must tell you that, from what we have seen so far, in a time of pandemic, all decisions made in economic policy will have to be evaluated with all possible self-criticism.
In no country in the world, except England, has a central bank put the little machine to work, but the Government must repay this year what it loaned it, with interest. The Banco de la República, to do that, must have unanimity, a discussion that will surely include whether the bank will charge the nation interest. Isn’t that like charging yourself interest?
Any decision in this regard will have to be made unanimously by the board of directors. I personally greatly admire the current members. And there is full confidence in the work being done, in a coordinated manner, between the National Government and the Banco de la República, to synchronize the liquidity that is required at the moment.
Luis Alberto Rodríguez is one of the youngest senior government officials.
Courtesy of National Planning.
Once the key of the bank machine is opened, is it not very dangerous that it is not so easy to close it again?
We are talking about hypothetical cases. We are experiencing a pandemic, with an economic shock never seen before, and we will probably need discussions that have never been before. And I’m going to give you another example, which has nothing to do with monetary policy.
In Colombia we had thought that the only ones we had to give resources and cash transfers to were the poor population; for example, Families in Action.
This has been the case for 20 years, since 1999. We had even designed a database, the Sisbén, to target them. But this pandemic, in less than three weeks, made us bring resources, with the Solidarity Income program, to those who not only were not in Familias en Acción, but who had never received a cash transfer from the State before.
And despite the criticism, are you satisfied with the results?
The work of Solidarity Income, as well as the VAT refund, has been gratifying. Many technicians behind that work, and millions of Colombians benefiting from the results.
It took Colombia 20 years to reach 2.6 million beneficiaries of Familias en Acción; The Solidarity Income program in days reached 1.2 million, and we will reach 3 million, many unbanked, in a few weeks.
We knew that there would be learning in the implementation, but in crisis you have to take risks; otherwise, the most vulnerable would suffer inaction.
The Prosecutor’s Office and the Attorney General’s Office reported on Friday that they opened an investigation against the Solidarity Income program, which is managed by Planning. What do you think about that?
We are and will be attentive to answer all questions, as we have done so far.
Let’s talk about the International Monetary Fund. The most recent report says that this second quarter of Colombia will be the worst of all; that the third quarter will be negative, but less bad, and that in the fourth we will soon be able to come back. Will we hold on?
In any case, the shock that we have will depend on the decisions that are made now. If the pandemic took a long time, and we did not find an effective balance between saving our lives, taking care of the virus, but at the same time saving our lives from hunger, Colombians could not bear it.
We are experiencing a pandemic with an economic shock never seen before, and we will probably need discussions that have never been before.
The International Monetary Fund says that Colombia will decrease its economic activity by 2.4%. ECLAC, which 2.6%. Is unemployment going to skyrocket?
In an economic crisis in which we have a negative growth rate, for the first time in many years, it is expected that indicators such as the unemployment rate will deteriorate. That is why we have taken measures to counter it, for example, issuing a 90% state guarantee on loans used to pay payroll and protect employment.
Is it a false dilemma that is said to exist between the economy and health?
Look, here there is only one objective: to save the lives of Colombians. At this juncture we can mainly die from two things: from covid-19 and from hunger.
What would you be a supporter of? To give money to people or to give money to companies, so that they don’t fire people?
Mine: giving money to the population, which was the most vulnerable before the pandemic, and to another, which is vulnerable due to the pandemic. For that you have to give money to people and also to companies, so that they do not fire.
There are populations here that, in fact, have not yet lost their jobs and, with help, may never lose it. But there are other populations that have never had a job, who were in informality, and the only way to reach them is with a cash transfer.
There is a number of informal sector, without banking. How are the grants delivered to them?
Today, with your cell phone you can make a transfer. I will give you two examples. There is a product called Daviplata and there is another called Nequi, one is from the Davivienda group and the other from Bancolombia.
These products allow transfers from one cell phone to another, without the need for a bank account. In a few weeks we have made almost a million money orders to refund the VAT and Solidarity Income to unbanked people through these mechanisms. Using that infrastructure, which is not heavy, does not have higher costs or such sophisticated procedures.
Before going through this coronavirus crisis, the banks’ portfolio was healthy. Are banks in danger right now with those debts?
So far there are no worries; And that’s why I think Banco de la República has done the right thing, giving liquidity to the economy. Today, all Colombians can be sure that their savings, under no circumstances, will cease to exist.
If for some reason a very deep external shock comes, that the financial system is stressed, the Fogafín could immediately act and save the savings of the Colombians. That did not exist in Colombia a few decades ago; I insist: we are a country with a solid economic institutionality. I insist on this, without denying structural and conjunctural challenges.
Colombia has never had such high indebtedness, and external debt is growing not only because of the dollar, but because taxes tend to fall. What are we going to do there?
Right now, as the President said a couple of days ago, the objective should be to get ahead of this pandemic. Save the lives of Colombians and give them sufficient resources so that they do not suffer the economic consequences of this pandemic.
We have no end date for this; No one guarantees that the pandemic is gone on May 11. Our sole objective at this time should be to mitigate the economic and social impacts of the pandemic in Colombia.
Did you know that you are called by your colleagues in government the ‘creature’, due to its youth? But they also say that you are very leftover and unfriendly …
(Laughs) I knew they were calling me ‘chicken’. But I didn’t know about ‘creature’, nor ‘unfriendly’.
There I leave the gossip … But unfriendly, it did not seem to me … And for that reason they do not stop recognizing that you are one of the protagonists that the Government has, in this emergency, at the forefront of National Planning.
We are many working in this emergency. Thanks for the interview, I hope the pandemic happens soon and we can have much more pleasant conversations about the Colombian economy.
MARÍA ISABEL RUEDA
Special for TIME
