(Bloomberg) -- Colombia’s new finance minister is trying to succeed where his predecessor failed: building consensus around a proposal to balance the budget without resorting to the type of tax hikes that triggered violent protests across the country for the past week.
Jose Manuel Restrepo took the reins of the Colombian economy saying he wanted to send a message of financial stability to investors. He promised to come up with a new and consensual plan to raise 14 trillion pesos ($3.7 billion) in revenue that won’t rely on broad-based tax increases on goods and public services.
“There are some points where a consensus can be reached,” he said in a radio interview on Tuesday. “But of course a sense of greatness is needed to open those spaces for a constructive dialogue, and to understand the importance of the adjustment that Colombia needs.”
The crisis exposes a chasm between rich and poor nations that’s been exacerbated by the pandemic. While the U.S. and the European Union spent trillions of dollars in stimulus with barely a peep from their debt markets, Colombia is desperate to ward off the wrath of bond vigilantes. One of the few Latin American countries that have consistently paid its debts, it is now struggling to rein in its budget deficit and stave off credit-rating downgrades that could send borrowing costs soaring.
Colombia’s peso dropped 0.6% on Tuesday to 3,827.95 per dollar, its weakest since the beginning of November, as investors awaited details about the fiscal plan.
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Restrepo, 50, a respected economist at home who held the job of trade minister since 2018, took over as finance chief as Alberto Carrasquilla was forced to step down after President Ivan Duque’s decision to withdraw his tax proposal failed to appease protesters.
“He has a conciliatory tone and that’s what is needed now,” said Andres Pardo, a former economic adviser to Duque who is now chief Latin America market strategist at XP Investments. “The market remains focused on the tax reform and waters are still muddied, but I’m optimistic with this new minister.”
Virtually the whole Colombian congress, including Duque’s own Democratic Center party, opposed the government’s initial tax bill because it raised levies on the middle class before a contested presidential election next year. Carrasquilla said in a statement late on Monday that his continued presence in government would “make it difficult to build the necessary consensus quickly and efficiently.”
His departure adds to the chaos in the Andean nation, grappling with nearly full ICUs from a Covid spike. Demonstrators and police are clashing daily in Bogota and other cities, while truckers and taxi drivers block roads and labor unions march in the streets.
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