A day after worldwide markets plunged, Colombia’s president and finance minister both made appearances to assure investors and citizens that their money was secure, while experts said measures taken earlier this year have left the country in a good position.
Colombian president Álvaro Uribe compared U.S. capital markets to “an untamed horse without reins” and urged the business sector “in the name of social responsibility” to prevent a spread of capital speculation, reported W Radio.
“The circumstances of the global economy impose the necessity that in the name of social responsibility, advances in speculative capital not be permitted,” he said in an appearance at Bogotá’s International Fair. “Speculative capital in the United States converted into an untamed horse without reins, and it is doing enormous damage to the global economy.”
Without denying that the international crisis could severely affect Colombia, finance minister Oscar Iván Zuluaga offered a picture of tranquility and stability to investors, guaranteeing that the government’s US$30 billion in foreign investments were well positioned to ride out the global economic downturn, reported Caracol Radio.
The lion’s share of that figure is the country’s US$24 billion in international reserves, which the minister claimed will not be affected as a result of the global finance crisis, as they are invested in American Treasury bonds, which are typically unaffected by market turbulence, reported the radio station and El Espectador.
He also guaranteed that the US$2.8 billion Fogafin fund, which guarantees savings accounts, and the government pension fund’s estimated US$4 million in foreign money investments—ten percent of the pension fund’s portfolio—are protected, reported Caracol Radio.
“We have improved the position of our reserves, but we are not immune in an extreme scenario like what we are living through,” he said, according to El Espectador.
For instance, Colombia’s pension fund has US$4 billion invested in foreign money, funds that will be directly affected by what happens in the global market, but Zuluaga noted that due to regulation the rest of the pension fund was heavily diversified, reported the newspaper.
However, if the crisis persists, the global economy could face the gravest recession since the Great Depression. In that case, Colombia would see less economic growth, more unemployment, lower wage, fewer exports, and a host of other ill effects.
Experts also weighed in, saying measures that at another time were as exaggerated and even counterproductive to the national economy, have become the tools to cope with current global circumstances, reported Portfolio.
Among the monetary policy measures taken by the Bank of the Republic in the last two years are the lace and a 4-point hike in interest rates between April 2006 and today, along with a decrease in spending so Colombia will not have to go out to borrow money when banks have little cash to spare, reported the financial newspaper.
“We believe that today the risks are low because the Bank has taken measures necessary to accommodate the slowdown,” said Luis Munoz, of Bancolombia.
The Colombian stock market COLCAP Monday was relatively unharmed. While both North and Latin American markets plummeted between 6 and 9.5 percent. The COLCAP only registred a loss of 2.33 percent.