Colombia’s finance minister on Wednesday criticized protectionism and an international currency war at the World Economic Forum in Davos, Switzerland.
“There is great political pressure on governments to be protectionist due to the strengthening of currencies as a defense mechanism for the productive sectors, but we believe that this does not solve the problem…Protectionism is not the solution,” Mauricio Cardenas told reporters.
The Colombia that saw record levels of foreign investment last year is the same Colombia that has struggled to keep the strength of its peso under control in the interest of keeping manufacturing and agriculture sectors healthy and competitive in a ruthless international currency climate.
Cardenas declared that the WTO (World Trade Organization) must move to solve the international currency war or countries like Colombia will run out of alternatives to trade-restrictive mechanisms.
“We are not in a state of equilibrium. The strong appreciation of Latin American currencies largely reflects the policies of U.S. monetary expansion. We interpret these measures as part of measures to boost the economies of the developed countries, but they are having a very negative side effect on emerging economies,” said the finance minister.
Colombia, however, should be more optimistic than in the past, according to Cardenas. Emerging market economies, he said, have more relative power for negotiating trade agreements.
“It’s not like it was before [when] we had to abide by [developed economies] terms,” said the minister.
Colombia forecasted 4.8% GDP growth for 2013. To get there, the central bank has planned to keep up its dollar-buying strategy in order to cool the rise of the peso amidst a foreign investment boom. Cardenas said the other measure is for the central bank to continue cutting interest rates. According to analysts, the central bank may slash rates by as much as 25 basis points.
The World Economic Forum, where Colombia’s finance minister has promised to tell “a success story” about Colombia’s decade of economic transformation, is an independent meeting that joins business leaders, policy makers, academics and other leaders of society in the interest of shaping global economic agendas. It is held annually in Davos, Switzerland.