As the Colombian central bank convened on Monday to discuss possible measures for controlling a strengthening peso and boosting economic growth, the country’s finance minister said that capital controls on the industrial sector are not the solution.
Raising tariffs on export-sensitive industries, like manufacturing, will not get the economy to grow said Mauricio Cardenas, Colombia’s Finance Minister.
Colombia’s central bank has considered several alternative measures to spur growth and slow down a skyrocketing peso. One such strategy, endorsed by Cardenas and president Santos includes the central bank again cutting interest rates. The bank has lowered rates in its last two meetings.
Business leaders in export sectors like manufacturing, and agriculture have raised concerns about the effect of the peso’s exchange rate against the dollar when it comes to international demand for its products.
In many cases, exporters are forced to take a hard loss of revenues and submit to dumping, a practice where a company sells its products abroad for a price that does not cover its costs of production.
But the country’s finance minister wants to steer clear of Brazil’s protectionist model, where capital controls help block out foreign capital in the interest of maintaining vigorous levels of industry back home.
Promoting trade without barriers is one of the forerunners on Cardenas’ agenda. Solving the economy’s industrial sluggishness in the midst of a rush of foreign direct investment is part of it.
“One doesn’t need a parade of business owners asking for more fees for their sectors as the measure of compensation,” said Cardenas. “I do not think that’s healthy.”